The Exterior Paints market in Europe dropped by -5.8% in value. Interconnection Consulting predicts a larger decline of -6,3% in 2024.

According to a recent study by Interconnection Consulting, the market experienced a decline of 5.8% in 2023, following a previous stagnation 0.4% recorded the year before. This downturn can be attributed to various factors, including market instability and lack of new construction projects, resulting in a decrease in the total number of liter of paints sold from 302 Mio. to 280 Mio. liters in analysed countries (Germany, Slovakia, Italy, Czech Republic, Austria, France, Spain, Poland).

The majority of paints, 68.8%, were sold in the Residential segment. However, even this segment saw a decrease in quantity of around 6.1% in 2023 compared to the previous year, with an overall market decrease of 0.5%. Pessimism continues to insist in 2024, with building forecasts for residential averaging -9.0%, which is more affected than the non-residential segment, averaging -4.2%, but with significant differences among countries.

Italy’s development could only be impromptu

In terms of growth rates, Italy and Poland performed best. The first recorded the highest value growth in the study (+12.7%). The effects of the Superbonus are still being felt, but these will dry up in the coming years as they have been reduced by the Italian government. Historically, they have gone from the initial 110 to 90 in 2022 and finally to 70 in 2023. From 2025, this measure will no longer exist, and the renovation market in Italy will grow more slowly in turn. Poland grew in value by 10.6% compared to 2022. This result is heavily influenced by the high inflation existing in the country. Despite its average prices being lower than those of Central European countries, the rate in quantity remains almost unchanged (+1.4%). Meanwhile, the largest decline was recorded in Austria, at -13.3% last year.

The structure of demand could change in the coming years: acrylic paints will dominate southern Europe

Emulsion Paints dominate the market as the most popular bonding agent used for exterior paints, with a market share of 34.5% in quantity. It is important to note that emulsion paints will lose share in the next few years, giving more protagonism to acrylic based paints. Italy and Spain have particularly acrylic paints of over 45% – mostly due to regulations, requirements of their usage in the residential segment and price convenience. Overall, silicone resin-based paints are also very popular in certain residential projects due to its high resistance to external phenomena. Silicone-resin paints have achieved nearly 30% of the total market in quantity.

Among the leading silicone-resin manufacturers in the analysed countries, notable names include AkzoNobel, Baumit, Brillux, Caparol, Meffert, PPG, Prosol, Unikalo, Weber, listed alphabetically.

01/07/2024

Copyright: Interconnection, Publication free of charge for coverage regarding the study and InterConnection Consulting.

The market for gutters in the top 5 European countries saw a significant decline of 10.5% in 2023, after modest growth of 0.7% recorded the previous year, according to a recent study by Interconnection Consulting. The total number of gutters sold decreased from 20.4 million to 18.3 million linear meters. Gutters cannot escape the negative construction environment and will not experience growth again until 2025.

The Perfect Storm for the Hardware Store

This shift is primarily attributed to a significant decrease in the new construction segment, which declined by 11.8% in 2023. 43.6% of all gutters sold belong to this segment and face the challenges currently affecting new construction overall: rising construction costs, high financing interest rates, geopolitical uncertainties, and reduced government subsidies. None of the five countries – Germany, Austria, France, Italy, and Poland – experienced market growth in 2023. Gutter sales declined by 2.7% in Italy and by 12.5% in Poland. The decline is higher the higher the share of new construction. For example, in Italy, about 80% of gutters are sold in the renovation segment, while in Poland, 65% of gutter sales are for new construction. The renovation segment is more resistant to the economic climate because a defective gutter does not allow for postponement.

Zinc Dominates the Market

Zinc is the most popular material in the gutter market, with a market share of 40.5%. Buying arguments for zinc include sustainability, easy processing, and recyclability. Germany and France have particularly high zinc shares of over 55%. PVC gutters rank second, with a market share of 19.6%. Poland stands out here, with an impressive 63.4% of all gutters sold being made of PVC. Despite the cost advantage of PVC, the other four countries prefer metal gutters. Aluminum leads in this category with a market share of 16.5%, especially in Italy and Austria. “Copper gutters rank last in popularity among metallic gutters, with 8.6%, due to the higher price and the specific appearance that corresponds less to modern architectural styles,” adds Julia Hrebenkova, author of the study.

Market for Global Players

Market concentration in the gutter market is relatively high: the top 10 manufacturers share a quantitative market share of 54.0% in the countries examined. Poland has the highest market concentration and simultaneously has many local manufacturers. The key players in the top 5 countries, in alphabetical order, are Gamrat, Marley, Mazzonetto, NedZink, Prefa, Rheinzink, and VMZinc.

In Germany, the number of sold window units declined by 10.2% in 2023. The main cause is a significant decrease in completed constructions in both residential and non-residential buildings (-16.9% and -8.6%, respectively). Overall, the decline in window sales in the new construction segment was 13.1%, and 7.7% in the renovation segment. The total window sales in 2023 decreased from approximately 15.4 million units to 13.8 million, as indicated by the regional study conducted by InterConnection, which analyzed window sales figures at the district level. The top 10 cities constitute about 17% of the window market in terms of quantity. When considering sales results across sectors, including new residential construction, new non-residential construction, renovation of residential buildings, and renovation of non-residential buildings, no federal state in Germany deviates from the general trend in the country. The combination of a decline in building permits, rising interest rates, high inflation, and declining real wages has led to a crash in building completions. Inflation and recession are hindering renovations.

Renovation of Non-Residential Buildings is Slightly less Affected.

Positive growth rates at the federal state level are observed only in specific segments: In the new residential construction segment, the federal states of Brandenburg (+7.3%) and Thuringia (+4.6%) are growth leaders. However, this increase suggests a delay in the implementation of construction projects rather than a dynamic development in the window market. In the renovation of residential buildings segment, only Berlin and Saarland show slight increases of 3.0% and 1.7%, respectively. In non-residential construction, the number of sold windows is influenced not only by the number of completed buildings but also by the size of the buildings. With a general decline in window sales in new non-residential construction by 8.6%, all federal states show very different results: from the sharpest decline in Schleswig-Holstein (-26.0%) to the strongest increase in Bremen (+11.0%) and North Rhine-Westphalia (+7.9%). The renovation of non-residential buildings proved to be more resilient in 2023, with a decrease of -4.1%, the lowest among all segments in the window market. The four federal states, namely Bavaria, North Rhine-Westphalia, Baden-Württemberg, and Lower Saxony, where 88% of the window market is concentrated in this segment, are relatively successful in the crisis year 2023. The overall decline in window sales in these states was 3.9%.

Top & Flop: Growth in Some Segments, Decline in All

The district of Peine achieved the highest growth rate with a 45.5% increase in sold windows. 2023 was a particularly successful year for Peine in new residential construction, with only a decrease in renovation of residential buildings observed. The district of Frankenthal in the Palatinate achieved a growth of 43.1% in 2023, leading the ranking ahead of Kronach (+42.4%). Frankenthal shows strong results in the new construction segment after an unsuccessful year in 2022. Kronach made it to the top three through successes in non-residential construction. Landau in the Palatinate rightfully occupies the first place among the losers (with a general decline of 41.4%) and experienced a decrease in sales in all four segments. The same can be said for Main-Spessart: the region loses in all segments, showing a decline of 37.8%, even higher than the entire Lower Franconia administrative district. Friesland concludes as one of the top 3 losers with a sales decline of 34.4%, significantly stronger than the Weser-Ems statistical region as a whole.

“Knowledge of regional growth rates is a crucial success factor for effectively addressing the German market,” says Julia Hrebenkova, the author of the study. Even in a market with a strong downward trend, there are growth islands and segments that resist the market development. Identifying these is a recipe for success.

In 2023, housing completions in Germany will decrease by 16.9%. Building permits will decrease by 32.0% due to rising interest rates and high inflation, making recovery in 2024 impossible. However, as the current Geomarketing study “Residential Construction” by InterConnection shows, regional differences in Germany are significant, and there are also some bright spots.

The total number of completed apartments in Germany in 2022 was 258,794, as shown by Interconnection’s regional study analyzing housing construction at the district level. This number will decrease to around 215,069 in 2023. Overall, the four federal states with the highest housing construction volume, namely Bavaria, North Rhine-Westphalia, Baden-Württemberg, and Lower Saxony, will experience a decline in the construction market of 18.4%, which is above the German average. Only in the federal states of Brandenburg and Thuringia will more apartments be completed in 2023 than the previous year (+7.1% and +4.7%, respectively). However, these increases suggest more of a delay in the implementation of construction projects rather than a dynamic development of the construction sector. In Brandenburg, for example, more than 30% of building permits issued from 2018-2022 were not implemented and are now being brought to life. The positive trend in Thuringia is only a brief glimmer: Thuringia will experience the strongest decline in the number of building permits in 2023, exceeding 50%. Many apartments remain vacant in this sparsely populated area, with a focus on renovating and converting existing housing in Thuringia’s residential construction sector.

Winners and Losers

The district with the highest growth in housing construction at the district level, with 511.4%, is Ansbach. The explanation is simple: 2022 was the least productive year in the execution of residential construction projects from 2018-2022; only 6% of the planned construction projects for the year were realized. Thus, 2023 became a year of seemingly unparalleled growth for the independent city of Ansbach. There is a similar reason for the increase in housing completions in the other two “top performers” (see chart), albeit from Lower Saxony and Hesse. Behind many presumed growth islands are delayed construction projects that were quickly realized due to rising costs. Regensburg, which was particularly successful in completing construction projects from 2020 to 2022, found itself at the top of the decline in the number of completed housing units by 64.6% in the crisis year 2023. The realization rate of approved residential buildings in Regensburg in 2023 is hardly improvable at 99%. The same applies to Coburg, which also clearly reflected the situation in the state’s housing construction in 2023. The next top performer in the construction decline, Oldenburg, had an unprecedented completion rate of 94% in 2022 and returned to its average values in 2023 with a completion rate decline of 63.7%.

Multistory Residential Construction on the Rise

A clear trend toward multistory construction is evident in Germany. In 2023, 63.6% of all completions will be in multistory residential construction. Berlin, Hamburg, Bremen, Hesse, Baden-Württemberg, and North Rhine-Westphalia have a higher rate of multistory residential construction in 2023 than the overall German average. These six federal states also account for 53% of all completions of multifamily houses. The construction of 20% of all multistory residential buildings is concentrated in five major cities in Germany, namely Berlin, Hamburg, Munich, Frankfurt am Main, and Hanover. This amounts to 27,477 housing units. Berlin also leads in the number of completed single and two-family houses.

Prefabricated Houses are Particularly Popular in the Southwest

28% of all completed housing units in Germany are single and two-family houses. Bavaria dominates with over 5,600 units, followed by Baden-Württemberg with over 4,800 units. Prefabricated houses play a significant role in this segment. Approximately 60% of constructed prefabricated houses are in Baden-Württemberg, Rhineland-Palatinate, Saarland, and Bavaria. The prefabricated house rate in this region is over 40%, well above the German average.

2024 without Growth

2024 will bring another decline in residential construction in Germany of 23.4%, and recovery is only expected in 2025. However, it is certain that there will be strong regional differences with growth islands even in 2024.

Despite sustained growth in residential construction completions over the past two years, Austria is experiencing an alarming decline in housing construction. This trend starkly contrasts with the positive developments in previous years, during which the number of construction completions increased by 3.6%, even as building permits declined by 22%. An analysis by Interconnection Consulting for the period 2018-2021 reveals that 13% of construction projects in the residential sector were left unfinished. The slight increase in construction numbers in 2022 is mainly attributed to postponed projects from the previous year. However, Interconnection Consulting predicts a crash in construction completions of 17.4% in 2023 due to a drastic decrease in building permits by 27.3%, rising interest rates, high inflation, and declining real wages.

2023: Less than 50,000 completed dwellings

The total number of completed dwellings in 2022 was 60,377, as indicated by Interconnection’s regional study analyzing housing construction at the district level. For 2023, it is anticipated that this number will decrease to 49,873. None of the federal states are exempt from this decline, with Burgenland (-27.7%) and Vorarlberg (-26.7%) particularly affected by a significant drop. The decline in Burgenland is concerning: population outflow leads to an oversupply of housing and, consequently, a decrease in construction activity. From 2018-2022, Vorarlberg had the highest completion rate. However, in 2023, this region will not have as many outstanding building permits as in other federal states.

Boom District and Flop District: Eisenstadt surprises, Zwettl disappoints

Eisenstadt, with the highest growth in housing construction at 50.6%, surprises as a boom district, despite no construction boom elsewhere in Burgenland. The proximity to Vienna plays a crucial role, making Eisenstadt now attractive to commuters. In contrast, a decline of over 59% in housing completions is expected in Zwettl, following strong growth in 2022.

Multistory residential construction on the rise

In a heavily urbanized country like Austria, there is a clear trend towards multistory construction. In 2023, 72% of all completions will be in multistory residential construction. Graz and the Vienna districts of Donaustadt, Floridsdorf, Favoriten, and Liesing are the districts with the highest construction activity in housing, contributing to nearly 26% of Austria’s total residential construction activity.

Prefabricated houses in Lower Austria continue to trend

The sector of single-family homes represents more than a third of all completed housing units in Austria. Lower Austria dominates with over 1.600 units ahead of Upper Austria. The market share of prefabricated houses is higher in the east (over 40%) than in the western federal states, supported by lower land prices and the strong presence of leading manufacturers such as Wolf, Genböck, Haas, Hartl, and Elk.

High interest rates and the increased need for equity in mortgage loans, caused demand for loans to fall dramatically. This is compounded by massive increases in construction costs, which far outpace core inflation. Building permits fell 13.1% in 2022. Construction completions in 2023 in the DACH region will therefore also plummet by a double-digit percentage amount (-11.5%), as a study by Interconnection Consulting shows.

Within the DACH region (Germany, Austria, Switzerland), the number of housing completions in Austria is higher in relation to the number of inhabitants than in the other two countries. While three apartments were built per 1000 inhabitants in Germany in 2022, the figure in Austria was 6.7. In Switzerland, 5.5 apartments were built per 1000 inhabitants. For this year, residential construction in Austria will also show a higher dynamic than in Switzerland and Germany, but at a lower level. In Austria, the decline will be particularly sharp at 15.5%. Whereas around 60,000 apartments were completed last year, the number will fall to around 50,000 this year. A similar reduction in construction momentum is also evident in Germany. In Switzerland, the decline is still a moderate 5.2%. The number of completed housing units per 1,000 inhabitants is down to 5.6 in Austria, 2.7 in Germany and 5.2 in Switzerland.

Construction momentum for single-family homes plummets
Overall, the DACH region is showing a trend toward multi-story residential construction (MGWB). This trend is being further fueled in particular by the sharp rise in mortgage lending rates, explains Ernst Rumpeltes, author of the study. “Especially the construction of single-family homes is collapsing sharply.” In 2018, the ratio of MGWB to single- and two-family homes was 65 to 35. In 2023, nearly 71% of all housing units will be completed in multi-story housing. This proportion should not change much in the next few years.

In Germany, the number of window units sold will fall by 5.4% this year. The reason for this is a large decline in building completions (-11.8%). With the exception of Saarland, all federal states are experiencing declines in window sales, according to a new study by Interconnection Consulting, which examines the market down to the state district level.

Overall, window sales will fall from around 15.4 million units to 14.6 million units in 2023. The strongest overall declines in window sales were recorded in the federal states of Brandenburg (-8.7%), Rhineland-Palatinate (-7.8%), as well as Schleswig-Holstein and Bremen with -7.7% each. Regions in the east fared best. In Mecklenburg-Western Pomerania and Thuringia, window sales declined by only 3.4% and 3.0% respectively. Bavaria is the German state with the highest sales, with around 3.2 million units sold, ahead of North Rhine-Westphalia with 2.8 million units sold. This is followed by Baden-Württemberg and Lower Saxony with 2.3 million and 1.5 million units sold, respectively, forecast for 2023. The top 10 cities account for about 17% of the window market in volume.

Double-Digit Declines in the Residential Sector

The decline in new construction is impacting sales in both the multi-storey residential segment and the detached and semi-detached house (EZH) segment. In the new-build EZH segment, the declines in the federal states are almost all in the double-digit range. Only Saarland is able to maintain window sales in this segment compared to 2022. Otherwise, the declines are all in the double-digit range. In the new multi-storey residential construction segment, Baden-Württemberg (-15.6%) and Berlin (-15.7%) and Bremen (-26.3%) show the strongest declines. The renovation sector must also expect slight declines for this year. Only three federal states (Bavaria, North Rhine-Westphalia, Saarland) are expected to achieve positive growth in this sector in 2023.

Non-Residential Construction Hit Slightly Less

The picture is similar in non-residential construction, with declines in both new construction (-8.3%) and renovation (-0.5%). The biggest setbacks in new construction were recorded in Schleswig-Holstein with -17.5%. Other federal states with a double-digit decline are Rhineland-Palatinate, Brandenburg and Hamburg. But the other federal states also mostly record only slightly lower declines. In the renovation sector it is Bavaria, North Rhine-Westphalia and Saarland with a positive forecast for this year.

Tops & Flops in the District Area

If you want to look for growth regions, you have to go mainly to the district level. The district of Frankenthal in the Palatinate will achieve growth of 15.6% in 2023 and thus leads the ranking ahead of Delmenhorst and Osnabrück. The negative ranking, on the other hand, is led by Wunsiedel in the Spruce Mountains with a decline of 21.5%, ahead of Altötting and Tirschenreuth.

In Germany, housing completions fell by 2.2% last year. In 2023, Interconnection Consulting forecasts a crash in housing completions of 11.8% due to the decline in building permits, rising interest rates, high inflation and declines in real wages. Only in the smaller federal states of Thuringia and Saarland will more flats be completed in 2023 than the year before.

Overall, the number of completed dwellings in 2022 was 160,455, according to Interconnection’s regional study, which analyses housing construction at the district level. In 2023, this number will drop to around 145,000. Larger cities in particular are affected by the sharp decline. Berlin, Munich and Hamburg will all lose around 15%. Düsseldorf (21.2%) and Karlsruhe (25.9%) will even have to accept declines of more than one-fifth of the housing construction volume next year. The federal states with the highest housing construction volume, such as Bavaria, North Rhine-Westphalia and Baden-Wuerttemberg, will plunge between 11% in North Rhine-Westphalia and 15% in Baden-Wuerttemberg next year. In all other federal states, too, the decline will mostly be around 10%. Only in the smaller federal states with a lower volume of housing construction, such as Thuringia and Saarland, can expect growth of 4.2% and 2.9% respectively in 2023. But there is still strong growth in isolated cases despite the economic slump in construction. In Osnabrück, an increase in housing completions of over 66% is expected. Similar growth is also forecast for the district town of Saalfeld-Rudolstadt.

Prefabricated Houses on the Rise

One- and two-family houses are even more dramatically affected by the decline than multi-storey housing. In 2022, the decline in single- and two-family house construction was already 8.2%, and in 2023 this will increase significantly to a minus of 16.4%. The decline is greatest in Thuringia at 38%. In the most important federal states in terms of volume, Bavaria (-17.6%), North Rhine-Westphalia (-16.5%) and Baden-Württemberg (-16.7%), the decline is also above the average for the nationwide decline. Multi-storey housing could still record a slight increase of 1.5% in 2022. In 2023 the decline will amount to 9.2%. This is mainly caused by the decline in construction volume in the major cities, which has already occurred before. Overall, it can be seen that the prefabricated house rate is increasing. In Baden-Württemberg, the rate will reach 50% next year. In Rhineland-Palatinate and Saarland the prefabricated house quota also reaches over 40%. In Bavaria, every third new house is a prefabricated house.

In Austria, housing completions declined by 1.7% last year. Only in Vienna, Salzburg and Burgenland were more flats completed in 2022 than the year before. For the next few years, both building permits and completions will decline overall, as a new study by Interconnection Consulting shows.

Overall, building permits in residential construction will decline by around 12% in 2023, which will also have an impact on housing completions. In 2023, a decline of 5.5% is expected in the entire federal territory. 15,669 residential units were completed in Vienna in 2022, more than in any other federal province. This is followed by Lower Austria with 10,083 and Upper Austria with 8,661 residential units. The largest increase in housing unit completions (single/two-family houses and multi-storey housing) was recorded by Salzburg with a plus of 14.3%. Vienna (+3.5%) and Lower Austria (+2.9%) also recorded increases in completions. In all other federal provinces there were declines in residential construction. In Vorarlberg the decline was 15.9%, in Styria 9.5%. Whereas Styria in particular, and especially the greater Graz area, experienced high construction activity in 2021 and the figures for 2022 are still above the long-term average, as Yuliia Hrebenkova, author of the study, explains.

Boom District in the Ski Region

Graz and the Viennese districts of Donaustadt, Favoriten and Floridsdorf are the districts with the greatest construction activity in the residential sector. In Donaustadt 4,779 residential units were completed in 2022, in Graz it was about 8% less than in 2021, but still almost 4,500 residential units. The districts with the highest growth in residential construction are Zell am See, Liesing and Oberwart (see chart). Districts with strong declines in residential construction were Leoben, Murau in Styria and Hermagor in Carinthia.

One-Family Houses Still in Fashion in Lower Austria

Overall, the multi-storey residential construction sector in Austria completes more than two thirds of all residential units. Naturally, the federal capital dominates in this segment with about 15,000 units, ahead of Styria with about 5,500 units. This is followed by Lower Austria and Upper Austria. In the segment of detached and semi-detached houses, about 5,000 housing units were completed in Lower Austria last year. Upper Austria came in second with about 300 units less. Lower Austria and Upper Austria dominate this segment with about 50% of all completions nationwide.

Housing completions reached a new peak last year – despite the ongoing pandemic. Thereby, rising urbanization drives the groth especially in urban areas at an overproportional rate. Subsequently, three districts in Vienna (Donaustadt, Favoriten, Floridsdorf) account for about 15% of the total new construction volume in Austria in terms of dwellings. Construction of flats in multi-storey buildings strongly benefits from this trend, as Interconnection shows in its recent report about residential construction which has been released on the 28th May in course of a press conference. 

In many parts of Europe the Corona-Pandemic was not the trend changer for the residential construction sector but an accelerator for a becoming apparent cool down. Building completions will drop by 9,3% in 2020 in the analyzed countries and are expected to record deep double digit negative growth (-13,3%) in 2021 as shown by the latest study from Interconnection Consulting.

Germany working off order books

Construction stops, security- and hygienic restrictions as well as a lack of work force due to closed borders are the reason for the bad mood of the construction industry and the declining investment readiness. While in countries like Germany and Austria the downturn has been herald, countries like France and the Nordics already expected a cool down of the residential construction activity despite COVID-19.  A specific of Germany is that for years the number of building completions cannot keep pace with permits. “Construction companies are recording full order books. Consequently the recession in Germany does not hit the industry as hard as there is still a lot of work to handle” explains Ernst Rumpeltes, author of the study. Accordingly the number of building permits exceeded the completions by over 50.000 dwellings the last few years. Building permits are expected to decline by 14,6% this year. The biggest drop on permits will be recorded in Italy (-36,7%) which has been strongly hit by the crisis. Similarly the situation in Poland and Hungary where residential building permits are expected to decline by  over 20%.

A case can be made for multi-storey buildings

Even though building permits are dropping in Poland, the decline of building completions is the lowest compared to the rest of Europe. On the other end of the scale Italy and Spain can be found – the two countries hit hardest by the pandemic. In contrast to detached- and semidetached houses, multi-storey buildings still benefit from rising urbanization and housing shortage in metropolises. Especially in Germany this trend can be observed where the share of completed apartments increased from 36,7% in 2008 up to 60,6% in 2019.

2020 will finally stop the longstanding upswing  of the construction industry due to the Corona-Crisis. For this year a decline of -2,7% of the residential construction activity is expected, which is only the beginning of the downward trend, as Interconnection Consulting shows in its latest report.   

Bottom will be reached by 2022 

Tightened hygiene- and safety regulations curb the residential building completions already in 2020. Furthermore, closed borders led the shortage of skilled workers on the construction sites which delay completions further. Short-time work and massive unemployment clearly have a negative effect on purchasing power and investment readiness of local households. Consequently investments in  homes are expected to decline leading to a drop of building permits in 2020 by 14,9% compared to the previous year which will obviously effect building completions within the upcoming years. While the downward trend in 2020 will be comparatively moderate, Interconnection’s forecasts for 2021 are drastic with a decline of -8,7%. Due to the delay between building permits and completions of residential buildings, completions are expected to hit the rock bottom by 2022 while in 2023 we can expect a recovery.

Urbanization further Rising 

Due to declined private incomes building completions of detached- and semidetached houses are expected to drop over proportional. While detached- and semidetached houses accounted for 29,0% of all completed dwellings in 2019 this share is expected to drop to 25,0% in 2020. Even though a slight recovery of this segment is expected, the big trend of urbanization continues regardless the corona-crisis. Consequently construction of apartments will further increase. Was the ratio between apartments and detached/semidetached houses 50:50 back in 2008 a significant shift towards apartments within the last ten years (71% to 29%).

High interest rates and the increased need for equity in mortgage loans, caused demand for loans to fall dramatically. This is compounded by massive increases in construction costs, which far outpace core inflation. Building permits fell 13.1% in 2022. Construction completions in the DACH region will therefore also plummet by a double-digit percentage amount in 2023 (-11.5%), as a study by Interconnection Consulting shows.

Within the DACH region (Germany, Austria, Switzerland), the number of housing completions in Austria is higher in relation to the number of inhabitants than in the other two countries. While three apartments were built per 1000 inhabitants in Germany in 2022, the figure in Austria was 6.7. In Switzerland, 5.5 apartments were built per 1000 inhabitants. For this year, residential construction in Austria will also show a higher dynamic than in Switzerland and Germany, but at a lower level. In Austria, the decline will be particularly sharp at 15.5%. Whereas around 60,000 homes were completed last year, the number will fall to around 50,000 this year. A similar reduction in construction momentum is also evident in Germany. In Switzerland, the decline is still a moderate 5.2%. The number of completed apartments per 1,000 inhabitants is down to 5.6 in Austria, 2.7 in Germany and 5.2 in Switzerland.

Construction momentum for single-family homes plummets

Overall, there is a trend toward multi-story residential construction (MGWB) in the DACH region. This development is being further fueled in particular by the sharp rise in mortgage lending rates, explains Ernst Rumpeltes, author of the study. “Especially the construction of single-family homes is collapsing sharply.” In 2018, the ratio of MGWB to single- and two-family homes was 65 to 35. In 2023, nearly 71% of all housing units will be completed in multi-story housing. This proportion should not change much in the next few years.