Norway’s Construction Market Under Pressure: Civil Engineering Offsets Weak Residential Activity

Norway’s construction industry has been under significant pressure in recent years, primarily due to a sharp slowdown in new construction activity. Declining demand, particularly in residential building, has weighed heavily on the market and led to historically weak sentiment among construction companies.

Business climate at historic lows

According to the latest business climate indicators published by the Norwegian Industry Association (NHO), sentiment in the construction sector reached an all-time low at the end of 2025. Both the assessment of the current market situation and expectations for the coming months are deeply negative. The overall indicator for construction companies stands at around –40, signalling a very weak market environment.

The construction supplier industry shows a similar picture: suppliers rate market conditions extremely weak, with the indicator scoring around –80, one of the lowest levels ever recorded. The data confirms that the Norwegian construction market remains under strong pressure.

Costs continue to rise despite weak demand

While construction activity is slowing, prices continue to rise. Material prices in particular have increased sharply since 2021 and 2022, affecting both residential and multi-family housing construction. Total construction costs (including material and labour) have also risen, though less strongly than material prices, as they include labour costs, which have shown a more moderate increase.

Overall, material price inflation has been the main driver of rising construction costs in Norway. As a result, companies are facing higher cost pressure even as demand for new construction remains weak.

Two-speed market: construction of buildings vs. civil engineering

Turnover data from the Norwegian statistical office highlights a growing divergence within the construction sector. In 2024, turnover in residential and non-residential building construction declined by around 7%. In contrast, civil engineering recorded growth of approximately 2%, supported by strong public investment.

Public spending on infrastructure projects such as roads, transport networks, energy infrastructure and utilities continues to support civil engineering activity. This trend is expected to continue into 2025, making civil engineering significantly more resilient than building construction.

As a result, Norway’s construction market is characterised by two distinct segments these days: a weak and volatile residential and non-residential building sector, and a more stable civil engineering segment with longer project timelines and lower sensitivity to short-term market fluctuations.

Outlook: Weak 2025, modest recovery expected in 2026

In December 2025, B+L forecasts for the Norwegian construction market were revised. For 2025, construction investment is now expected to decline by around 2.4%, reflecting weaker-than-expected market conditions. This marks a more pessimistic outlook than previously assumed.

For 2026, however, expectations have improved slightly. Construction investments are forecast to grow by around 2%, indicating that recovery will take longer but may gradually take hold in the coming year.

First signs of stabilisation in housing starts

Despite the overall weak environment, there are early signs of stabilisation in residential construction. After a sharp decline in housing starts in 2023 and 2024, a small increase was recorded in 2025. While the absolute level remains very low – with fewer than 20,000 dwellings compared to more than 30,000 in peak years such as 2020 – the upward movement suggests that the downturn may be bottoming out.

Although the market is still under pressure, the recent increase in project starts is expected to support investment and construction activity in 2026.

Conclusion: Slow and uneven recovery

Norway’s construction market remains in a difficult phase, with residential and non-residential building under strong pressure and business sentiment at historic lows. Rising costs continue to challenge companies, despite weak demand. Civil engineering, supported by public investment, remains the stabilising force within the sector.

While 2025 is expected to remain weak, early signs of recovery in housing starts and improving investment prospects for 2026 suggest a slow and gradual turnaround rather than a rapid rebound.