Colombia’s construction sector recorded a 7.5% decline last year, its worst performance since 2020, when the pandemic sank productive activity. This contraction deepens a cycle of weakness that has been unfolding since 2023 and has put to the test one of the historically most dynamic sectors of the national economy.
Official figures from the National Administrative Department of Statistics (DANE) reveal that construction has completed 2 1/2 years in negative territory, a phenomenon that sharply contrasts with the double-digit growth seen just a few years ago.
The blow is felt across the entire economy. The sector’s decline not only reduced the momentum of gross domestic product (GDP) in 2025, which grew 2.6%, but also marked a shift in the nature of Colombia’s economic growth: Where investment in buildings and civil works once drove expansion, consumption, and public spending are now sustaining activity.
This shift has profound implications for employment, investment, and business confidence.
Colombia’s construction sector falls to its lowest level since 2020
The construction sector was, for years, one of the pillars of growth following the recession caused by the lockdowns in 2020 due to the COVID-19 pandemic. In 2021, construction shone again with growth of more than 10%, and in 2022 it reached rates of up to 12%, figures that are also explained because those years were the recovery periods after the collapse caused by the pandemic.
However, starting in 2023, the story changed: Growth slowed to just 0.5%, and in 2024, the sector was already showing signs of fragility with a moderate contraction. The 7.5% drop in 2025 not only represents the worst result since the health crisis but also extends a downward path that now worries analysts, builders, and economists.
The cumulative contraction over two and a half years — from 2023 to 2025 — has had tangible effects on the country’s total investment. Gross capital formation grew just 1.3% last year, well below the pace of overall GDP, largely due to the slowdown in construction.
Mauricio Hernandez-Monsalve, an economist at BBVA Research, has pointed out that this weakness does not appear to stem from other components of investment, such as machinery and equipment, but rather from the persistent contraction in new construction.
The consequences of this decline are not limited to construction sites. Construction links more than three dozen subsectors, from materials and machinery to professional services, so its weakness reverberates in manufacturing, trade, and employment.
Lower construction activity translates into fewer purchases of inputs, fewer direct jobs on sites, and fewer contracts for suppliers. The result is a negative multiplier effect that has also cooled other areas of the economy.
🏗️📐 El DANE entregó los resultados de las Estadísticas de Licencias de Construcción #ELIC. Según este informe, en diciembre de 2025 se licenciaron 1.849.791 m² para construcción, 723.390 m² menos que en el mismo mes del año anterior (2.573.181 m²), lo que significó una… pic.twitter.com/vFcBXaNZSW
— DANE Colombia (@DANE_Colombia) February 14, 2026
What explains the decline?
The causes of this downturn are multiple and complex. The macroeconomic environment has been marked by high interest rates that have made mortgage loans more expensive and limited demand for new housing.
The rate set by the central bank remained high in 2025, reducing access to credit for households and businesses, a crucial factor in a market where buyers depend on loans to finance their projects.
This credit pressure has led many potential buyers to move away from new housing, redirecting themselves toward options such as existing homes, which have experienced a significant increase in demand.
In addition, the weakening of the construction sector is occurring in a context of subdued foreign and domestic investment. A recent analysis shows that total investment in Colombia stood at levels close to two-decade lows, with construction as one of the main drivers of that decline.
The sector’s contraction reflects not only fewer residential and commercial projects, but also lower investor confidence amid regulatory uncertainty, financial costs, and a political context in full transition ahead of national elections.
Another factor that has influenced the downturn is the drop in building permits approved for social interest housing (VIS), which fell significantly in 2025.
According to DANE data, the area approved for this type of housing declined by nearly 47% in September 2025 compared with the same month a year earlier, while non-VIS housing showed a moderate rebound.
That gap in permits reflects a segmented market in which the segment most sensitive to public policy and cheap credit — social housing — has been the hardest hit.
Despite this outlook, there are signs that suggest a possible stabilization. Some analysts project that investment in civil works, such as infrastructure, could recover some ground in 2026 and 2027, and that building construction — including housing — could begin to emerge from its lowest levels.
However, that rebound will not be immediate or automatic; it will depend on factors such as a reduction in interest rates — something that for now appears far from being consolidated — greater certainty for investors, and public policies that revive demand for new housing.