On average for the fifteen countries of Western Europe residential production still accounts for more than 49% of the total, that is more than 700 billion euros, distributed equally over new production and renovation of existing residential assets. In the East it is worth little more than a half that: only 26%, while the dominant slice of the market is non-residential building construction, which in the four countries reaches 41% (31% in Western Europe). Civil engineering too exceeds the housing subsector and in 2007 absorbed 33% of the value produced by the sector (ten percentage points more than the weight of civil engineering in Western Europe). This reflects two areas having different development situations and most especially having different availabilities of resources, but also with diversified growth needs. Thus if in the West the subsector’s health depends more and more on demographic dynamics and on the capacity to renew and upgrade existing building, in the East the current economic situation is regulated most especially by civil enginnering and non-residential investments.

There are then a number of “structural” features that characterize the various countries, such as the per capita construction-production value.

The differences are quite relevant and it seems some time will still be necessary before the situation can appear more uniform over groups of countries. If the average value of “per capita constructed items” was 3300 euros in 2007, the range runs from a level not exceeding 1200 euros in the four countries of the East, to the almost 4400 recorded on the average for the fifteen western countries.

Comparison with the per capita GDP confirms, for Central-Eastern Europe, average per capita levels equal to one-third those of the other fifteen countries, that is ten thousand euros as against the more than 33 thousand in EU15. But the ranking of the individual countries displays differences from their GDP ranking. Of interest is the case of Spain, which stands in fifth place in terms of per capita construction output while in terms of GDP it exceeds only Portugal among the western economies, and then only the four economies of Europe of the East. This indicates the construction sector’s dominant role in the national economy, as is confirmed by the ratio of output of constructions to total GDP, equal to 21%, as against an average of 12% in the nineteen countries. Close to Spain’s situation is Ireland, which covers the highest positions in the two per capita rankings and then come Portugal, Czech Republic and Finland. To be remarked is the case of Sweden, which has a per capita GDP among the highest (sixth in 2007) while her per capita constructions indicator is among the lowest in the fifteen countries: 2600 euros.

2008 and 2009: two difficult years In the cyclical behaviour of the construction sector, 2007 represented the end of the phase of expansion that had gone on since 1999 and culminated in the 2006 peak, when construction grew faster than the total GDP (3.8% as against 3.0%). Since 2007 the cycle entered its slowdown phase, losing more than one percentage point of growth (2.7%) and becoming aligned with the rate of expansion of the overall GDP (2.8%).

The consolidated data for 2007 indicates a more perceptible growth than envisioned six months ago. Evidently, the more pessimistic forecasts that, on the basis of the economic events that started up after the summer, had indicated a slowing down or braking of growth in many countries of Western Europe, did not have a significant effect last year. The principal change in the 2007 growth rate (+2.7%) relative to the Vienna estimates (+2%) is in fact to be traced to the group of fifteen countries, which went from +1.7% to the current 2.5%. Substantially unchanged is the dynamics of the four countries of the east, which confirmed the same rate of expansion as estimated at year’s end (+7.5%).

In 2008 the market is grazing recession: the last revision of the data estimates a zero growth for the sector (-0.3%) compared with a GDP that continues, even if weakly, to grow (+1.8%). A similar scenario for 2009, with a construction sector that remains in stagnation (+0.2%), feeling the effects of a further slowdown in the European economy (+1.7%). The expectations of a slight recovery have slid to 2010 (+1.6%), when the GDP should once more reach a growth rate of two percentage points(2.1%). 2008 will instead be the year during which the effects of the new macroeconomic climate will be felt when the preceding estimated 1.4% growth becomes a 0.3% dip, to be traced back once again to Western Europe, which will mark a -0.8% (and not a +1%). On the contrary for Eastern Europe the rate of expansion will improve from 9.2% to 9.7%. 2009 will be a year of stasis for Western Europe (instead of the 1.2 percentage points of growth estimated in Vienna), while the four countries of the east will go on growing quite rapidly. Finally, forecasts up to 2010 indicate that construction may possibly issue from its stagnant phase in the fifteen countries, in correspondence with a rate of expansion only slightly downsized in the other four countries.

Construction always the locomotive in Eastern Europe, but stagnating in the west.

Comparative analysis of the rates of growth of the GDP and of construction in the two territorial agglomerates shows how in Eastern Europe growth of construction goes on being much more lively than is the GDP. In 2007 it was 7.5%, confirming the 2006 rate, a two-year period during which the GDP grew by six percentage points. Construction’s role has been affirmed and consolidated during the year underway and will be in the coming two-year period: in the medium term the sector will show a mean yearly growth exceeding 8% as against the GDP’s 5% In the fifteen western countries however, 2006 was a particular year, in which construction still played a locomotive role within the GDP, while 2007 was the year of alignment in the trends of the two quantities. But starting from 2008, in a very weak scenario, construction will grow (or better will not grow) less than overall production, that is 0.1% per year on the average during the three-year period 2008-2010, as against the 1.7% of the GDP. Braking construction most especially is the euro-area countries’ market, for which an average dip of 0.1% is estimated during the three years, as against the 0.8% of the non-euro western countries. The average yearly dynamics of the coming three years conceals however an important characteristic: that is, the market of the east will show a slight but continuous slowdown in the trend of expansion, while construction in the Western European countries should progressively issue from its current stagnation. The Polish market in the first place, which represents by itself more than half the eastern market, and which is characterized by the fastest growth. After a +12% in 2007, for the three years 2008-2010 the phase of expansion will go ahead at an average yearly rate of 12%, even if the trend is toward a progressive slowdown in growth. Stabler instead is the growth envisioned for the area’s second market, the Czech, which in the medium term will go on increasing at about 5% per year, for a weight exceeding 25% of the market. For the two smaller markets, which together do not account for 20% of Eastern Europe construction, different dynamics are recorded. Construction in Hungary will go through a phase of expansion and, after the arrest suffered in 2007, will report growth rates gradually more brilliant, from 3% for 2008 up to 6% for 2010. In Slovakia instead a slowdown in growth is prospected, which will go from 6% for the year underway to 3% for the last year of the forecast scenario.

The weak points in the western countries What is happening in the five largest countries determines the group’s overall dynamics, and some things are most recently transforming the trim of these large markets, which represent 70% of the Euroconstruct market and 75% of the western market. In the first place the two Spanish and Italian markets have ceased to grow and have entered negative zone. In the second place the French market has halved its rate of expansion for the first years 2000-2006. Then, Germany’s quite weak scenario. Germany, with growth rates little higher than one percent during 2008-2010, seems to have limited the liveliest phase of its recovery to between 2006 and 2007 Finally, the still more modest rate that should characterize construction in Great Britain (0.7% on the average in the three-year period 2008-2010). Among the other countries, significant is the case of the Irish market, for which the worst performance among all nineteen countries is foreseen, with an average yearly dip over the three years 2008-2010 of more than three percentage points.

The subsectors: the decline of the residential, which gives way to the non-residential subsector and most especially to the civil engineering. The new European construction cycle opening with 2007 corresponds to the differentiated evolution of the main market segments. As figure 6 shows, the sector’s total production reached in 2007 the maximum production levels, which will remain substantially unchanged over the two-year period 2008-2009, to begin growing weakly again in 2010. But the dynamics of the various segments display a very much more diversified internal trim.

New residential production stopped a year before, in 2006, when the expansion peak was reached, which was followed by the first year of slowdown. 2008 marks a first very rapid dip, which will become even more perceptible in 2009, when the production levels of 2003 will almost be touched. In 2010 the housing market should show the first signs of a recovery even if the production standard of the real estate boom culminating during 2005-2006 is by now far away.

The trend of uninterrupted growth for the other two subsegments, that is new non-residential production and civil engineering, which since 2003 to the last year of the forecast scenario see production levels increasing each year. In particular in 2009 and 2010 infrastructures will be the most dynamic components in the whole market, reaching 120% of the 2003 standard.