Poland’s construction sector experienced a contraction of 2.1 per cent in the first eight months of 2026 compared to the same period last year, with renovation work suffering a dramatic collapse, according to a report from the Polish Development Fund (PFR).
The sector has been struggling for several years, the report shows. Construction and assembly output dropped 7.7 per cent year-on-year in 2024, managed a modest rebound of just 0.7 per cent in 2025, before declining again by 2.1 per cent in the January to August 2026 period.
According to PFR analysts, the main weakness stems from a four-year decline in building construction, which fell 6.2 per cent year-on-year in the first eight months of 2026. This downturn has been driven by higher interest rates, increased construction costs and deteriorating profitability. Specialist construction work also contracted, down 2.7 per cent in the same period.
Infrastructure strong, renovations crash
The only bright spot in 2026 has been infrastructure construction, which grew 1.6 per cent year-on-year in the first eight months thanks to European Union funding. Investment projects overall rose 9.7 per cent from January to August, but this was overshadowed by a catastrophic 28.1 per cent collapse in renovation work during the same period.
Despite the overall slowdown, the housing market is showing signs of revival. Developers, responding to renewed demand, increased activity significantly. Building permits jumped 14.9 per cent year-on-year from January to August, whilst construction starts rose 4.8 per cent.
The number of dwellings under construction increased marginally by 0.6 per cent year-on-year, though such high levels were previously only seen in 2021 and 2022. Completed homes rose 4.5 per cent year-on-year, though the total remains below the 2020-2023 levels.
Mortgage boom driven by refinancing
The housing market revival has been fuelled by a surge in mortgage lending following a series of interest rate cuts that improved household borrowing capacity. The second quarter of 2026 set a quarterly record for new mortgage lending, reaching 39.7 billion złoty, with the number of mortgages – 83,600 – the highest since 2007.
However, the PFR report highlighted that a substantial portion of 2026’s mortgage volume came from refinancing existing debt. The share of such loans jumped from approximately 8 per cent a year earlier to nearly 28 per cent in the first quarter of 2026 and 26 per cent in the second quarter.
The mortgage revival has halted years of decline in active mortgage agreements, with the total mortgage portfolio reaching a record 529.7 billion złoty. The average mortgage value grew 7.33 per cent year-on-year in Q2 2026, with loans exceeding 500,000 złoty becoming increasingly common. Foreign currency mortgages, which once accounted for over 60 per cent of housing finance, have declined to nearly 10 per cent in 2026, with new mortgages issued almost exclusively in złoty.
Profitability under pressure
Weaker demand and cost pressures have squeezed financial results across the construction industry. Building construction remains the most profitable segment, and its advantage over other categories actually increased in 2026, despite lower activity levels.
The proportion of construction firms reporting a net profit fell to 64.5 per cent in 2026, below the ten-year median of 68.7 per cent. Sales profitability in 2025 and 2026 was lower than in 2020-2024, though still better than the 2010-2019 period. Building construction remains the most profitable category, but profitability has declined noticeably compared to 2022-2023.
Nominal wage growth in the construction sector has also slowed sharply, from 13.5 per cent year-on-year in 2024 to just 5 per cent in August 2026, according to the PFR report.
What this means for Poles in Poland
If you work in Poland’s construction sector, the slowdown – especially the sharp drop in renovation work – may affect job security and wage growth, which has already slowed to 5 per cent. However, the infrastructure segment supported by EU funds and the recovering housing market offer some stability, particularly for those in residential building and large-scale projects.
For prospective homebuyers, the mortgage market is highly active, with competitive rates following interest rate cuts. If you are considering purchasing property, be aware that average loan sizes are rising and that refinancing existing mortgages has become popular, potentially offering savings if you have an older, higher-rate loan. Building permits and construction starts are up, suggesting more new housing supply in the coming months. Check the latest mortgage offers through Polish banks and compare refinancing options if you already have a home loan.