Overall construction activity
The energy price shocks of the previous year and a sharp reduction in inventories will lead to an industrial recession in Europe, which will also affect Austria. Due to the temporary loss of purchasing power, other sectors also lose momentum.
High interest rates have weighed on demand for construction throughout the euro area, where financing costs have risen significantly. In addition, inflation has led to a sharp rise in construction prices, which has also dampened demand. The slump in demand has a significant impact on value added in the construction industry. It contracted by 1.1% in real terms in 2023.
For 2024, WIFO therefore expects a further decline in construction investments of 4%. To stablise the construction industry, the Austrian government presented a housing and construction offensive at the end of February 2024. The volume of relief is estimated at more than EUR 2 bn, although the construction industry is likely to absorb only part of the economic stimulus due to the broad spread of the measures and the expected deadweight effects. Moreover, due to the time lag between the adoption of measures and actual construction activity, a significant revival of construction investment is not expected until 2025. In 2025, WIFO expects construction investments to increase by 1.5% and construction value added by 1.0%.
Housebuilding
Austrian residential construction is one of the sectors most affected by the rise in construction costs and the turnaround in interest rates. Although the segment is robust in 2022, the effects of the turnaround will be felt in 2023 and most strongly in 2024. New residential construction will contract for several years to come, with a return to growth not expected until 2026. Residential renovation will cushion the decline in new construction to some extent and will continue to expand in the coming years. Energy policies and climate targets, which have become more ambitious in recent years, will lead to increased construction activity to improve the energy efficiency of buildings.
Non-residential construction
Non-residential construction was also hit by the combination of the economic downturn, high construction costs and rising interest rates. Real investment in new construction fell in almost all major sub-segments in 2023. While new industrial construction still benefited somewhat from a backlog of orders from previous years and therefore did not experience a larger decline, the downturn will be most pronounced in office and commercial construction. This is expected to intensify in 2024, before investment recovers slightly in 2025 as the economic upturn strengthens.
GDP 2023
BILLION
POPULATION 2023
Total investment in construction in 2023
BILLION
Civil engineering
In civil engineering, public infrastructure programmes will have a positive impact on transport construction in 2022 and 2023. The energy sector is benefiting from the development of renewable energy sources and the telecommunications sector from plans to expand high-speed internet. As a result, significant growth is expected, especially in 2023, despite the difficult economic environment. Investment in public transport is expected to slow down in the following years and is therefore mainly responsible for the forecast slowdown in civil engineering.
Prices of construction materials
Some building materials that are dependent on the world market, such as structural steel and bitumen, have now stabilised at a somewhat lower level after very volatile price movements. On the other hand, key mineral building materials such as cement products and bricks remain at unusually high price levels, despite the fall in primary energy costs. Many building materials manufacturers have also announced further price increases for the coming months.
In view of the slow decline in consumer prices, the development of labour costs will continue to add to the pressure on prices in the coming years.
Per cent variation of investment in real terms of previous year
Number of building permits in residential construction
