EECFA 2018 Summer Construction Forecast

The Eastern European Construction Forecasting Association (EECFA) – the forecasting association conducting research on the construction markets of 8 Eastern European countries – has released its 2018 Summer Construction Forecast Reports up to 2020. The main findings of the reports are summarized below. The full reports can be purchased, and a sample report can be viewed at eecfa.com

Construction up to 2020 in ‘South-East Europe-5’ (Bulgaria, Croatia, Romania, Serbia, Slovenia)

The region is posting a strong economic growth which is fuelling building construction. Some of the region’s housing markets are seeing record-breaking results, so the first voices for overheating appeared. We think these markets are far from it, though. At the same time, construction labour shortage, due to economic migration from these countries to Western Europe, is one factor giving cause for concern in the future. With accelerating absorption of EU funds, civil engineering is expected to contribute positively to growth all the way on the forecast horizon.

Bulgaria

Construction output in Bulgaria continues its recovery and is expected to reach an 8.8% growth in 2018. The star performer is the residential construction segment, benefitting from improved employment and real disposable income, as well as the ongoing process of the concentration of population in big cities. Additionally, the steady economic development will increase investments in non-residential projects. Civil engineering construction is forecasted to contribute strongly in the next few years after EU fund absorption started catching up. Therefore, estimations for 2019 and 2020 are for an additional growth of 7.1% and 6.0%, respectively.

Croatia

Croatia’s construction output is likely to grow at a respectable rate until 2020 (by an estimated 2.2% in 2017 and a forecast 11.6%, 6.2% and 4.0% in 2018, 2019 and 2020, respectively). Particularly well performing sectors include hotel construction, education and health and certain civil engineering subsectors, especially railways. A global trade war, fallout from the Agrokor crisis and rapidly rising construction costs are threats to Croatia’s construction industry. And all are now significantly more likely to occur than they were at the time of EECFA’s 2017 Winter Report. But fortunately, none yet constitutes an imminent danger. In 2021 or soon thereafter growth will probably begin to tail off in a number of important sectors as Croatia’s catch-up phase gradually comes to an end, but exactly when and how this will occur is not yet clear.

Romania

The housing and non-residential segments are set to continue their excellent performance in 2018, and, in spite of an underwhelming performance in the civil engineering segment, the total growth of the construction sector in 2018 is forecasted to reach 7.1% (up from +6.8% in Winter 2017). As projects co-funded by the EU are starting to be implemented, Continue reading EECFA 2018 Summer Construction Forecast

Ljubljana among cities with the fastest growing real estate prices in the world

Real estate prices in Slovenia have been increasing at a furious pace

Ljubljana, the capital city of Slovenia, has strongly rebounded from the recession. Since the bottom of the recession in 2015 till 2017, the average real estate price has increased by 15%. However, the price growth accelerated in 2018, making Ljubljana one of the hottest real estate markets in the world.

Written by Dr. Ales Pustovrh – Bogatin, EECFA Slovenia

Ljubljana Castle Hill and City Center – Source: visitljubljana.com

Following the peak in 2008, the Slovenian construction and real estate markets experienced a catastrophic slump. Total construction output decreased from EUR 4.6bln in 2008 to EUR 2.3bln in 2016 according to EECFA. The average real estate price in Ljubljana dropped by 25% between 2008 and 2015 (although the average price hides significant differences in price trends in different neighbourhoods and real-estate segments).

However, on the back of the strong economic growth in the last few years, prices started growing again. In Ljubljana, they increased by 15% between 2015 and 2017 according to GURS[1], the national database. In 2017, KnightFrank’s Global Residential Cities Index estimates that residential real-estate in Ljubljana has increased by another 4.4 %[2].

And the pace of real-estate price hikes seems to be accelerating further. Continue reading Ljubljana among cities with the fastest growing real estate prices in the world

Updated Permit and Completion Data – 2017

As Q4 2017 permit and completion data are being published, we’ve been updating our interactive permit & completion charts for residential and non-residential buildings in the 8 Eastern European countries EECFA covers
and in Hungary (covered by Buildecon in EUROCONSTRUCT)

Interactive charts for the 2 sub-markets:

1. Residential permit&completion (number of dwellings)

2. Non-residential permit&completion (floor area and number of buildings)

And this summary table shows the latest data of permitted buildings (residential and non-residential floor area together).

These data have been compiled by Janos Gaspar, Head of Research (EECFA, Buildecon)

EECFA 2017 Winter Construction Forecast and Revision

EECFA (Eastern European Construction Forecasting Association) – the forecasting association conducting research on the construction markets of 8 Eastern-European countries – published its 2017 Winter Construction Forecast Reports on 4 December. A concise summary on the main findings is outlined in this article. Please consider that foreseen development stories are rather different for the 3 submarkets (residential, non-residential, civil engineering) of construction in the countries we cover. In Russia, for example, civil engineering is expected to drive the total market back to expansion. Unless you need only an impression about the total market, we kindly suggest consulting with our reports.

Construction outlook up to 2019 in South East Europe: the countries EECFA dubs ‘South East Europe-5’ are Bulgaria, Croatia, Romania, Serbia and Slovenia. The overall picture is still very optimistic, but the expansion rate of the total construction market has been revised a bit downward, mostly due to the worsened expectation in EU fund absorption on the forecast horizon. This affects largely the civil engineering submarket, where 9% cumulated growth is foreseen for 2018-2019 for the region as a whole. In a very favorable macro environment where money is cheap, building construction is set to continue to recover; with a 17% cumulated market growth predicted for the upcoming 2 years. Shortage of skilled labour in construction is a major constraint of a more rapid growth, though.

Bulgaria: the country is facing a 7% growth in total construction output in 2017 as EU funds of the new cycle are fuelling civil engineering construction which dragged down the whole sector in 2016. Thus, total construction output comes from a very low level; in 2016 it nosedived by 35.2% (compared to the forecasted 31.1%). In 2018, the construction sector is set to register a 5.6% increase (as opposed to the 6.4% forecasted earlier), while 2019 should bring a 5.7% rise (up from the +4.5% predicted formerly).

Croatia: the good news for construction growth in Croatia is the country’s increasing capacity to obtain EU funds, at which the current government seems to be getting better and better. Continued strong growth in GDP, private consumption, retail turnover and industrial production should also benefit construction. Total construction output growth is estimated to be 6.3% for 2017, which has been revised down from the 11.2% growth expected in summer due primarily to caution shown by buyers, bankers and developers in the residential segment and to delays in some government-led, civil-engineering projects. Continue reading EECFA 2017 Winter Construction Forecast and Revision

Development of Permit and Completion – H1 2017

Our permit-completion graphs about residential dwellings and non-residential buildings have been updated with the latest figures.

Here you can follow the developments on interactive charts for all the 8 Eastern European countries we are dealing with in EECFA + Hungary Buildecon is reporting about for EUROCONSTRUCT.

Residential permit-completion (number of dwellings)

Non-residential permit-completion (floor area and number of buildings)

Data compiled by: Janos Gaspar (EECFA Research, Buildecon)

Housing market in Russia: Demand potential shaping future market dynamics

While in the EECFA Forecast Report Russia we estimate/forecast residential output, this article is looking at another angle of predicting housing market developments: demand potential in the Russian housing market (the number of households able to buy housing) as the main indicator of further market dynamics. Positive macroeconomic indicators in Russia currently are suggesting growth in real incomes and an increase in the population’s solvency, which in the near-term future is set to raise the number of households able to buy housing. This growth in demand potential will have a positive impact on residential output, yet, this is not something that will happen overnight: the Russian housing market is predicted to continue to slump for the time being. Nevertheless, the predicted growth in demand potential will play a major role in halting this drop, leading to an expansion in the housing market in 2019.

Written by Andrey Vakulenko – MACON Realty Group, EECFA Russia

‘North Valley’ Residential Complex in St. Petersburg – Source: http://www.severdol.ru

Having the largest share in total construction both in value and volume terms, the housing market is the engine of the whole Russian construction market. Any change – decline or growth – in the housing subsector may have a decisive effect on the Russian construction industry as a whole; as it was the case, in particular, during the crisis of the Russian economy in 2015-2016. In this period, the housing sector enjoyed an unprecedented level of state support (more details in the current/previous EECFA reports), which prevented the entire construction industry from collapsing.

The state of the housing market primarily depends on the ability of the population to purchase housing. Other market factors, such as the volume of supply in the market, the level of competition or the cost of housing are secondary. It is the ability of citizens to buy housing that ultimately determines the total volume of effective demand, which in turn regulates development activity and price trends in the local housing market. At the same time, the indicators of the population’s need for housing are also secondary in terms of the dynamics of the market situation; they are of an abstract nature and cannot be used to predict the situation in the market. The need for housing is a conditional market potential, which, without the ability to buy housing is never realized. The ability of the population to purchase housing is the real market potential, which – in most cases – is realized in transactions. The level of housing provision (need) affects only the nature of demand: investment purchase, purchase of a first home, improvement of housing conditions, among others. Continue reading Housing market in Russia: Demand potential shaping future market dynamics

Game of Towers – Sofia’s New Dynamics in Office Construction

Demand for offices in Sofia is boosting a huge activity in office building and mixed-use projects, and growing land prices trigger the construction of higher and higher such buildings and office towers. The game of towers has generated a public debate on whether to designate zones where these buildings are to be concentrated.

Written by Yasen Georgiev and Dragomir Belchev, EPI – EECFA Bulgaria

BLU Offices, City Tower, Millenium Center (upper row), Capital Fort (lower row). Sources: http://www.novinite.bg, http://www.blu-offices.com, http://www.capitalfort.com, http://www.icon-bulgaria.com

In 2016 the Bulgarian economy registered a growth of 3.4%, driven mainly by increasing household consumption and export volumes. Forecast for 2017 and 2018 suggests that the country’s GDP will register a further expansion between 3% and 3.5%, reflecting the positive signs from the labor market and their implications on individual demand.

These trends support EECFA’s latest summer forecast for an increase in the overall construction market by more than 5% in 2017 and over 3% in 2018. Building construction is set to grow even at a higher pace, thus reaching an annual increase of around 8% for 2017-2019. Beside the accelerated growth of residential construction, it is the non-residential sub-sector that shows increased dynamics after a year of negative growth.

According to the EECFA 2017 Bulgaria summer report, office construction is expected to rise and reach an average growth of 4.7% over the 2017-2019 period. This forecast is supported not only by the announcement of a number of projects due to start in 2017-2018, but also by the increase in permitted floor spaces of office and administrative buildings in 2016 on an annual basis, as well as by the scale of started projects in Q12017 compared to Q12016.

In this regard, Sofia remains the most economically active city in the country. Despite the emerging demand for contemporary office space in secondary cities, in terms of floor space, 77% of all permitted office and administrative buildings in 2016 are located in the capital city, similarly to the share of started office and administrative buildings in Sofia, in a nationwide comparison accounting for 74%.

What stands behind is demand coming from outsourcing and IT companies that either seek to expand or to offer more appealing office facilities to their employees Continue reading Game of Towers – Sofia’s New Dynamics in Office Construction

GDP revision in Turkey: implications on construction market size

TUIK (Turkish Statistical Institute) had been working on harmonizing its GDP calculation method with the most recent international standards from 2013 on. The first revised figures were published at the end of 2016. After the revision, the construction market size was measured twice as large for 2015 as it was considered earlier.

This presentation is about the revised construction size and EECFA’s opinion: Turkey’s GDP and Construction Investment

Prepared by Janos Gaspar (EECFA Research)

 

 

EECFA 2017 Summer Construction Forecast and Revision

We have released our summer construction forecast on 16 June 2017 on Bulgaria, Croatia, Romania, Russia, Serbia, Slovenia, Turkey and Ukraine. This post intends to summarize the most important projections for these construction markets for the years 2017-2019. These are our main findings; for a deeper understanding, please consult our reports. You can contact us on eecfa.com.

Outlook for the EECFA regions

The highly optimistic outlook for South East Europe is maintained by EECFA. Leaving behind the transitory 2016, when the absorption of funds available in the new EU programming period (2014-2020) was still at a low level, the upcoming years are characterized by a bigger expansion of the construction market than that of GDP. Building construction is predicted to well outperform the total market, with a yearly average rate of 9% over the horizon. The small growth in the region’s total civil engineering market is attributed to the negative expectations in Romania.

Sideway moves, no further market expansion on the horizon are what we consider the most probable scenario for the 3 East European markets together. Turkey and Russia, being far the two biggest markets we cover in EECFA, is expected to show some similarities. In both countries our forecasts are moderately optimistic in the civil engineering market. While in the building construction market the outlook is clearly negative for Russia and neutral for Turkey. In Ukraine, the recovery experienced in 2016 is predicted to be sustained until 2019. Both building construction and civil engineering could expand further with a relatively good pace. Continue reading EECFA 2017 Summer Construction Forecast and Revision

Agrokor aggravation: Do the Agrokor Group’s tribulations threaten the Croatian construction sector?

Earlier this year, Croatia’s construction industry at last seemed on track for recovery after many dismal years of negative growth. 2015 saw a number of construction sectors moving into positive figures for the first time since 2009, but the recovery really took hold last year with all construction sectors likely to show positive growth once complete data for the year are available. Now, though, the Agrokor crisis has thrown this rosy picture into doubt.

Written by Michael Glazer, SEE Regional Advisors and Tatjana Halapija, Nada Projekt – EECFA Croatia

agrokor_1
Illustration of Agrokor HQ (Croatia) photo by Zeljko Hladika, source: http://www.24sata.hr

First, some background. The Agrokor Group is by far ex-Yugoslavia’s largest business conglomerate, with EUR6.4 billion in sales in 2015. Indeed, it is one of Central Europe’s largest companies (11th, according to Deloitte’s Central Europe’s Top 500 2016) and its second largest retailer (behind Poland’s Jeronimo Martins Polska, also according to Deloitte). Among other things, Agrokor owns the biggest retail grocery chains in Croatia, Slovenia, Serbia and Bosnia-Herzegovina (BiH), several large Croatian agricultural producers, important Croatian resort projects, significant travel agencies and major distribution companies for the wholesale and HoReCa sectors in Croatia and BiH.

Agrokor is now in serious trouble. It is having difficulty finding liquidity, a government administrator has been appointed for it by the Croatian government, the Slovenian and Serbian governments are considering similar measures and it is making only limited payments to its suppliers, on its taxes and to its lenders.

In theory, the consequences of an Agrokor Group collapse could be grave for all of the economies in which the Group operates, particularly Croatia, Continue reading Agrokor aggravation: Do the Agrokor Group’s tribulations threaten the Croatian construction sector?