Although most European Union (EU) Member States experienced moderate corrections in price trends, some countries recorded larger falls as a result of the financial crisis. Broadly, three years of decreases and stagnation followed 2008, before construction prices generally returned to their pre-crisis peak in late 2011. Since then, price levels across the EU have seen steadier increases.
EU28 production in construction annually
Whilst general price trends have followed a similar path over recent years, there are variations across EU Member States and indeed beyond, which reflect the different stages of economic recovery, development and market maturity. Moreover, the variances also represent the extent to which each country was affected by the financial crisis, along with issues related to the differing narratives of ‘new Europe’ as well as those countries bordering the EU.
Construction activity across nearly all EU Member States experienced significant falls as a result of the global financial crisis. Periods of political turbulence and economic instability in the EU in subsequent years only exacerbated these trends. Some non-EU States were affected comparatively more during these periods due to exchange rate weaknesses or adverse FX movements.
Regarding the EU, available data highlights a north-south divide as the construction industries of EU Member States were affected to varying degrees after 2007. Construction output in a number of southern EU Member States experienced contraction of approximately 50 per cent , whereas some northern EU Member States saw output expand over the same period. It was Poland though which recorded some of the largest overall increases in output since 2007, a trend founded on a buoyant commercial, residential and infrastructure market that is set to continue, though this is subject to political and, to some extent, exchange rate stability.
All construction sectors followed a similar trend to a low in early 2013, with building construction work in general down by over 25 per cent from peak output recorded in 2008. Confidence and construction activity began to pick-up from mid-2013 and into 2014. But output generally has not made further notable gains into 2015, with a broadly stable trend in output observed across the EU Member States particularly.
The increasing strength of the Euro is maintaining the attractiveness of Europe’s more mature commercial property markets, with some nine consecutive quarters of economic expansion. The significant growth of the United Kingdom has not been replicated within the Eurozone, with broadly stable trends being observed.
Exchange rate fluctuations do however continue to have a significant impact on the overall cost of delivery, especially in those markets bordering the eastern fringes of the Eurozone, which continue to import considerable quantities of finished materials.
With external economic turbulence appearing over the horizon, it will be positive actions such as the EU’s Juncker Infrastructure Investment Plan worth in excess of €300 billion, and continuing investment volumes from European and US-based funds that should enable construction output stability in the EU over the next three years. Only time will tell whether governments will begin to focus on stimulating construction and infrastructure investment as a way to further boost economies, particularly with the backdrop of ultra-low interest rates and the longer-term effectiveness of quantitative easing now under scrutiny.