The Ifo Institute, which is based at the University of Munich, says that between 1992 and 2007 European home building volume rose by about one third to €718 billion (in 2007 prices).  In this period civil engineering construction recorded real growth of only about 18 percent, and in the non-residential sector, construction activity increased by 16 percent.

After the bursting of the American bubble in real-estate prices last summer and the various resulting economic repercussions, the construction industry in Europe has now been severely affected, plunging especially European home building into a deep crisis. Increased mortgage interest rates, tighter credit conditions and falling house prices have led to a perceptible decline in home construction demand in many places. The only countries in the Euroconstruct group not affected are the four members from eastern Europe, Poland, Czech Republic, Slovakia and Hungary.

According to appraisals of the 19 Euroconstruct institutes, residential construction volume will decline in 2008 and 2009 by a total of 5½ percent. "This negative development is hitting a sector that in the first half of 2007 had great hopes of expansion in many countries", Ludwig Dorffmeister, Euroconstruct expert at the Munich Ifo Institute, explains. Especially the construction of new apartment buildings is likely to shrink by around 8 percent in 2008 - a decline of this order of magnitude has not been observed since the beginning of the 1990s. Up to 2009 the decline in construction volume should amount to as much as 12½ percent.

The effects on far-ranging sectors linked with housing construction are serious. The housing boom that lasted through 2007 in countries like Denmark, Ireland, Norway and Spain induced many real-estate firms to a significant, credit-financed expansion of their activities. Firms that were especially sensitive to a possible trend reversal are those that had specialised in a few growth markets. Many of these companies are bankrupt or are currently on the brink of ruin.