Dutch construction is expected to shrink by 2.5 percent next year, the largest decline since 2013, according to an ING report on the construction sector. According to the bank’s economists, construction is under pressure due to higher interest rates, falling house prices, a shortage of building land, and the nitrogen issue.
“In 2022 and early 2023, the increasing demand for energy-saving measures offered a counterbalance. The demand for these measures remains high, but the boom is over due to the drop in energy prices,” said ING. According to the bank, there is already a “significant drop” in demand among project developers and producers of concrete and bricks. “In the coming quarters, this will be felt throughout the entire construction chain,” said the economic office.
ING expects the construction sector to grow slightly this year by 0.5 percent.
The economists point out that the production of building materials like concrete, cement, and bricks has fallen by 20 percent in a year. “Construction companies are ordering fewer building materials that are mainly used in new construction projects because they are already dealing with fewer orders,” the report said.
Another bottleneck for construction is the nitrogen issue in the Netherlands, the solution to which may be delayed due to the recent fall of the government. “Permits must be applied for to build, but because nitrogen is released – even if it is very little – it is often impossible to grant a permit,” explained construction economist Maurice van Sante. Larger construction projects, in particular, are being delayed as a result, he said.
The Economic Institute for Construction (EIB) indicated last month that the construction of new homes is declining faster than expected. The institute predicted there will be 6.5 percent less construction this year than last year. For next year, the independent research agency expects another fall of 8 percent.
The EIB assumes that total construction output, which also includes renovations and road construction, will fall by 2 percent this year. It adjusted its expectations for 2024 from a 2 percent to a 2.5 percent contraction.
Reporting by ANP