Residential construction activity is expected to fall by as much as 25% this year, according to a new report from the Fundación Laboral de la Construcción, a construction sector labour foundation.

Non-residential construction is expected to fall by up to 11%, whilst public works will increase by a modest 3%.

The fall in activity is forecast to start bottoming out next year, along with construction sector unemployment. 535,800 construction workers lost their jobs in 2008.

The foundation bases its forecasts on cement usage, which fell by 24% in 2008, the biggest drop in 10 years. Demand for cement fell even further in the first few months of 2009.

Falling demand is largely being driven by the collapse in housing starts, which fell by 60% in 2008 and which are “expected to fall even further this year,” says the report.

As a result of falling activity, the construction sector’s contribution to GDP has gone from 18.8% to 16.6%, still well above the European average.