Housing crisis in Europe: Italy ranks last in new dwellings completed

Brussels – Europe’s new housing sector faces a challenging year. According to estimates by the Euroconstruct network, in which the ifo Institute in Munich also participates, some 1.46 million dwellings will be completed in 2025, down sharply from 1.55 million in 2024. Forecasts for 2026 speak of a slight recovery: around 1.51 million units, a sign of stabilization still far from pre-crisis levels.

The slowdown in construction activity is linked to a combination of factors: higher interest rates, loss of household purchasing power, and a sharp rise in construction costs. These elements are compounded by legislative and fiscal changes, including the reduction of incentives for new construction and the introduction of taxes, which have dampened investment.

According to Ludwig Dorffmeister, an industry expert at the ifo Institute, these conditions have had a marked impact on the European residential market, slowing down the start and completion of projects in many countries.

Germany represents one of the most critical cases. The number of new homes completed in 2025 is estimated to stop at 205,000 units, a drop of 19 percent compared to the previous year. 2026 looks even weaker, with only 185,000 expected. A recovery, albeit modest, may only come in 2027, with around 195,000 dwellings. Despite some signs of improvement in terms of real wages and property prices, overall market conditions remain challenging. The extraordinary measures announced to accelerate housing production, known in Germany as “construction turbo,” are having limited effect so far.

At the European level, the picture is mixed. Some countries, such as the Czech Republic, Sweden, and Hungary, are showing positive signs, with increases respectively of 27, 21, and 20 percent in the number of completed homes. However, in ten European countries, the figure is still falling. Notable among these are France, with a 14 percent decline, and the United Kingdom, with a 10 percent contraction.

The number of completed dwellings per inhabitant also shows significant differences. Only Ireland, Poland, and Switzerland will exceed 5 units per 1,000 inhabitants in 2025. Ireland clearly stands out, with more than 38,000 planned dwellings, or about 7 units per 1,000 residents. Germany, the United Kingdom, and Spain stand at just over 2 units, while Italy is at the bottom of the ranking, with just 1.6 new dwellings per 1,000 inhabitants.

The outlook for 2026-2027 remains weak. Euroconstruct forecasts minimal growth, supported by some public investments and infrastructure interventions, but not enough to close the gap opened in the previous two years. Without more decisive action on costs, building regulations, and access to credit, the European residential market risks being trapped in a prolonged phase of stagnation.