Migration effect on Europe

10 November 2015

Buildecon's estimates of asylum seekers that will be in need of housing in Europe

Buildecon's estimates of asylum seekers that will be in need of housing in Europe

With an ageing population, migration in Europe can have a positive effect on the construction industry across the continent, according to Buildecon, which said that this would be one of the issues to be discussed at the 80th Euroconstruct Conference, to be held in Budapest, Hungary, next month.

It said that immigrants were generally young – with 79% of asylum-seekers last year under 35 – and able people, but that the ageing demographic could be changed only at a slow pace.

It said it seemed unlikely that enough immigrants would be accepted to the EU in the next few decades to balance this effect, but an increase from current levels was probable.

Buildecon said, “Nevertheless, today the worsening of the demographic situation seems to be inevitable, even if the more-immigrant solution were to be accompanied by an increase in retirement age. This puts pressure on potential long-term economic growth levels.”

Good and bad

It said this meant both good and bad for the building industry. Lower potential economic growth affects the non-residential sector most directly – less demand for new office buildings, warehouses, etc. The civil engineering sector is affected in a similar way, with smaller demand for new infrastructure.

In the residential sector, when lower potential economic growth meets a stagnating population, it means lower demand for new buildings. Buildecon said that this was enough just to keep the housing stock stable as an ageing population does not need many greenfield projects.

Looking at the short-term effects, Csaba Gábor Pogonyi and János Gáspár of Buildecon examined evidence both from European and Anglo-Saxon countries (New Zealand, US, UK). It pointed out that immigration has been historically higher in these countries and that their labour markets were more flexible, so findings might not be fully applicable for continental Europe.

It found, in the short term, that there were opportunities both in the private- and publicly-funded housing markets

It said this year had seen the highest number of asylum-seekers in the EU. According to recent estimates, around 1 million have arrived, pushing supporting systems to the brink of collapse.

Buildecon said it seemed inevitable that governments would have to spend more on strengthening their social care for immigrants, which meant growing demand for housing both in the private (at the low-end rental market) and public sectors.

The biggest question, it said was how European countries would agree on new asylum policies – if they agreed at all.

With a higher flow of asylum-seekers into the EU expected, states will have to invest in camps and other means of housing asylum applicants and accepted refugees. But the extent of this depends on the final decision. All asylum-seekers might have to wait in remote areas of border countries such as Greece, Hungary and Italy, which would result in a much smaller effect on the overall housing market, said Buildecon.

The next question, it said, was what would happen to asylum-seekers whose application was accepted. The effect on the construction sector depends on the state’s decision, as it could result in state-funded construction projects or a rise in low-end urban rental prices due to increased demand.

Buildecon said it was interested in the number of refugees’ whose accommodation would have to be solved in the near future. Using conservative assumptions, it calculated that in the next three years, excess demand for social housing would be 900,000 people, for whom the current social housing capacity was not enough.

“Instead of accommodating them in gyms and stadiums, Member States will have to provide them proper living conditions. Most likely, this will be a combination of social housing and funds given to rent apartments.”

Sustained need

In the long term, it said there was sustained need for new housing and gentrification.

It said it had concluded that smaller potential economic growth in the EU seemed to be unavoidable. This would, said Buildecon, have a deteriorating effect on the housing market as well.

“Increased immigration, however, is the upside for the future. It expands demand for new housing, raises prices and leads to the gentrification of unfrequented areas.”

It said sustained levels of increased immigration augmented demand for new housing.

In summary, it predicted that in the short run, increased immigration would lead to social housing programmes, and raise both demand and price of low-end rented apartments.

In the long run, immigration could mitigate the deteriorating effect of lower potential economic growth on the construction sector. Moreover, it could lead to increased gentrification in the biggest cities of the European Union, it said.

The 80th Euroconstruct Conference will be held in Budapest, Hungary, on 3 and 4 December, and will include a construction market forecast for 27 countries, including the member countries of EECFA, the construction forecasting research co-operation of national research institutions in Bulgaria, Croatia, Romania, Russia, Slovenia, Serbia, Turkey and Ukraine.

More details are available from www.buildecon.com/80theuroconstruct/.

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