Unprecedented challenges
Increase in bankruptcy filings in the construction industry in Sweden
This key European industry is currently undergoing one of its most challenging periods in recent history.
While increased infrastructure investments buffered the effects on parts of the market, the key residential new build market is in a deep crisis. Housing permits for apartments & houses declined by 20% and more year on year in 2023 (varying somewhat by market), with some key markets like Germany (-28%), France (-24%) or Sweden (-52%) showing contractions that go even beyond the ‘08/’09 crisis & in some instances even beyond any recorded numbers (systematically provided since 1990) [2]. Loans to households for house purchases deteriorated even more drastically, e.g. in HY1 2023 compared to HY1 2021 we have seen a -49% decline in Germany and a -34% decline in France [3].
These recent developments are hitting construction companies very directly: In the latest “Weil European Distress Index”, the Real Estate sector is clearly shown to be the most distressed industry. A recent survey among residential builders in Germany showed that >20% suffer from project cancellations & >10% are under financial distress – record levels that have not been seen since the reunification in 1990 [4]. Beyond some more prominent cases (also discussed in the press) like e.g. the Austrian Signa Holding or the Germany-based Gerchgroup, many countries are fighting increasing number of bankruptcies in the broader sector, i.e. construction companies, developers, building materials supplier & other. For example, Sweden has seen a 38% increase in bankruptcy filings in the construction industry [5].
Decline in loans to households for house purchases in Germany in 2023, compared to 2021
In the midst of these challenges, regulatory focus within the EU has increasingly leaned towards renovation as a key strategy for enhancing energy efficiency in the existing building stock. However, focusing mainly on renovations overlooks the pressing need for new construction to address the escalating housing crisis. While renovations improve existing structures, they fall short of solving widespread housing shortages and fail to meet modern living standards.
A balanced strategy that elevates both renovation and new construction is therefore crucial to resolving the EU's comprehensive housing and environmental challenges.