German Construction Is Turning the Corner: Sector Analysis and Outlook by ING

Key Takeaways

• 1.German construction output is expected to return to modest growth of 1% in 2026 and 2% in 2027, ending a multi-year contraction that exceeded 10% between 2020 and 2025.
• 2.Subsector divergence is marked: residential is showing early signs of recovery and infrastructure is expanding (particularly railway renewal), while non-residential building remains severely depressed with office permits down over 40% compared with 2022.
• 3.The €500bn infrastructure and climate neutrality SPV will provide gradual rather than immediate support from late 2026 and into 2027+, as administrative bottlenecks, planning delays, and reallocation to cover regular budget deficits dilute its initial impulse.

Table of Contents

• Back to growth
• German construction underperforms
• German contractors still pessimistic
• Hormuz crisis adds new uncertainty to construction costs
• Planned price hikes fall back to previous levels
• Labour shortages are structural
• Labour shortages are becoming structurally high
• Low water levels
• Wide differences across subsectors
• Decline in German building sector
• Recovery in new residential building
• Permits edge higher but momentum weakens
• Business case for new houses remains complicated
• German house prices lag behind Europe
• Office and industrial market under pressure
• Decline of issued permits in non-residential sector continues
• Renovation market
• German share of renovation sector is large
• Infrastructure growth survives
• Highest growth railways infrastructure investments
• Germany's €500bn fund
• "Additional" package German investments in infrastructure & climate neutrality
• Long-term expectations among German contractors improved only temporarily
• German construction has passed its lowest point

Report data

Development Construction sector volume, latest data point June 2026 (Index January 2020=100, SA)