We trim our estimates: Softer sector view, shy German permits, rising cost volatility

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We trim our estimates: Softer sector view, shy German permits, rising cost volatility

UBS European construction team's view

The UBS European construction team recently updated its 2026 outlook on European

and US construction (link). Their key message remains directionally unchanged:

We see bottoming out in the US and in Europe, with US and European

infrastructure as the segment growing strongest and European non-resi growing

least.

US construction demand remains softer than Europe for 2026,with the US

expected to outgrow Europe in FY27E again.

Cautious outlook for resi near-term: In the light of higher rates, higher

construction costs and continued increased political uncertainty from the Middle

East, we expect lower resi volumes in both Europe and the US (Europe LSD, US

negative) with an acceleration in FY27E, if the Strait of Hormuz opened again and

bond yields decline.

Europe resi (-1/+4% FY26/27E): As already on low levels, we lower our EU resi

growth by c100/200 bps in FY26/27E, assuming an inflection is pushed out

another 1-2 quarters (now 1Q27 instead of 3Q26). While non-resi is expected to

remain flat, resi should grow from a low base in FY26E, while from mid-2027

spending should be impacted by permit growth lowered by Middle East. European

resi permits (as leading indicator for resi new build) started recovering in FY26,

but we expect a slow upward trend through 2026 as seasonally adjusted permits

have stayed range-bound since mid-2025, especially in Germany and France. For

European resi renovation, Euroconstruct forecasts c1% real growth in FY26/27E

each, with Germany being the single biggest renovation market (1/3 of total

spending; Euroconstruct 1/1.5% for FY26/27E).

US resi (0/+2% FY26/27E): US resi is expected to trough in 2Q but does not