“This year will mark the bottom for the building market, impacted by the downturn in new construction, expecting the recovery to start in 2025.”
The Norwegian economy in 2023 has been marked by significant uncertainty, weakening the Norwegian currency (NOK) and prolonging higher inflation rates. Inflation remains above the 2 percent target, and the key policy rate is expected to stay high to mitigate price pressures. As a result, households are experiencing declining real wages and reduced demand across various sectors, particularly in new residential construction. Sales and the number of new residential building starts are at their lowest levels since 2008. On the positive side, the labor market remains tight, providing some economic stability. While construction costs are stabilizing, they remain higher than pre-pandemic levels.
We anticipate that this year will mark the bottom for the building market, significantly impacted by the downturn in new construction. However, as construction cost development becomes more predictable and interest rates fall, we expect market conditions to improve, leading to increased building activity.
The construction market value in 2023 is estimated at 49.2 billion euros (fixed 2023 prices), representing a volume decline of 6.5 percent from the previous year. The decline in housing construction will suppress overall market growth this year and next. We expect the total construction market to reach its lowest point this year before seeing a recovery in the new-build market in 2025 and 2026. According to these forecasts, the value of construction production will approach 53 billion euros by 2026, measured in fixed 2023 prices. The civil engineering market is contributing to this growth, although signals of lower transport investments than previously anticipated have led to downward adjustments within this forecast period.
