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Kirk Smith, Director, Cost and Commercial Management, Germany and Austria, outside in front of a blurred brown background featuring a building and mix of natural and urban elements.
Kirk Smith
Director, Cost and Commercial Management, Germany and Austria
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The German construction industry is struggling to recover as stabilisation meets structural braking factors. 

Germany has entered 2026 with tentative signs of stabilisation after a prolonged recession, yet any recovery remains fragile. While GDP in 2025 edged slightly upwards, the construction sector is continuing to face significant challenges. Structural issues, such as high costs, weak demand and persistent geopolitical instability are overshadowing early indicators of improvement. 

Recovery with uncertainties 

Despite stabilised material prices and a modest rise in building permits, the broader economic environment remains unsettled.  

Inflation has softened but not enough to meaningfully ease financing constraints. Meanwhile, geopolitical tensions have reintroduced energy market volatility.  

Residential construction remains the weak spot with high costs, restricted financing and investor caution continuing to suppress demand. By contrast, public-sector construction and commercial projects show early signs of recovery, supported by infrastructure and digitalisation investments. 

Multifaceted cost environment 

The construction industry faces a mixed cost environment as subdued sentiment and strong competition limit price increases in some segments, while material‑intensive trades continue to experience cost pressure from rising raw material and energy prices. After construction prices increased by around 3.0–3.5% in 2025, early 2026 saw continued stability, though higher oil and metal prices are tightening conditions. 

Our baseline scenario assumes construction tender prices will rise by around 5.0% in 2026, driven by elevated energy and material costs. For 2027 and 2028, price growth is expected to moderate to approximately 3.0% per year as competitive pressures continue to offset structurally higher input costs. 

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