Construction statistics or constructing statistics?

Development of Russian construction statistics

Written by Andrey Vakulenko – MACON Realty Group, EECFA Russia

Assessing the development of construction industry on national scale is practically impossible without high quality statistical data that allow us to draw conclusions on industry trends and create any forecast model. The quality of Russian official statistics and its reliability have increasingly been becoming the subject of public discussion and the work quality of statistical service has been questioned by independent experts and economists. To overcome the problems, at end 2018, a comprehensive plan was developed for the reform and modernization of the Russian Federal State Statistics Service (Rosstat).

Design by EECFA Central, source of original picture: nlomov-pnzreg-ru

In 2018 the Russian economy seemed to have registered the highest growth over the past 6 years. According to Rosstat, GDP grew from 1.6% in 2017 to 2.3% in 2018; the highest value since 2012 (+3.7%). Such pronounced growth came as a surprise since all official and unofficial forecasts were much less optimistic: an average of 1.5%-1.8%. To a large extent, the successes of the Russian economy in 2018 derived from artificial manipulations, i.e. Rosstat’s review of the growth rate of the construction sector in 2017-2018. The indicator of the volume of construction works completed over 12 months has drastically changed: 2018 was to amount to RUB 8.4 trillion, 5.3% higher, or RUB 422 billion higher (at current prices) than in 2017. It was astonishing as previously Rosstat estimated construction works for 11 months of 2018 to post a modest growth of 0.5%. The 2018 growth in construction was a record for the last 10 years: it was only in 2008 when the sector grew at a higher rate (by 12.8% per year). On the contrary, between 2014 and 2017, construction industry saw a steady decline, which, according to official statistical calculations, gave way to a rather sharp increase in 2018. The final contribution of the construction sector to Russian GDP in 2018 was 0.3pp, although in 2017 it was previously negative (-0.1 pp). Such drastic changes caused a wide discussion for the following reasons:

  • Weak argumentation for revising statistics. The Ministry of Economic Development and Rosstat recalculated construction data in late 2018 and early 2019 on grounds of clarifying previously submitted information by respondents at the end of the year. (This is due to the peculiarities of statistical accounting in construction in Russia: the peak of completions is at the very end of the year and then statistics are updated for a long time. Final data for the reporting year are published in spring and some figures may be adjusted retrospectively for a longer period). However, in this case, Rosstat adjusted the data by RUB 565bln, referring to only one project (Yamal LNG), which adds only RUB 241bln. The artificial increase in the indicator couldn’t be explained by only one project in one region, but Rosstat did not voice other official explanations.
  • Growth of indirect construction indicators. Volume of completed construction works posted a massive rise against the backdrop of a decline in many industries related to construction, for example, in the production and transportation of building materials. In 2018, rail transportation of building materials for the year decreased by 6.8%, cement transportation also fell by 6.5%, cement production shrank by 2%, brick production dropped by 4.8%, and the construction of metal structures saw a 1.5% slump. Thus, according to Rosstat, production and transportation of building materials dipped, while more construction works were carried out. An important indicator here is also growth in the volume of housing completion, the most capacious segment of the Russian construction industry, which at end 2018 showed a steady decline by more than 4% (and by 6% in the multi-unit segment).
  • Administrative reasons. In 2017, Rosstat, previously a fully independent agency under the Government, became subordinate to the Ministry of Economic Development. This created an internal conflict of interest since Rosstat data directly or indirectly indicate the effectiveness of the Ministry and the reliability of its forecasts.

EECFA’s Russia Construction Forecast Report with detailed analysis and forecast for the construction market of Russia can be ordered on http://eecfa.com/

Over the last year, official statistics was at the center of public discussion in the scientific community due to regular adjustments and revisions. And construction is not the only area of statistics affected by data manipulation, there are examples for other important macroeconomic indicators being revised:

  • At end December 2018, Rosstat significantly improved data on Russia’s GDP growth rate in 2015-2017. The new estimate showed that in 2016 the economy expanded by 0.3% despite the previous drop of 0.2%. GDP growth in 2017 also turned out to be adjusted, although less: +1.6% instead of +1.5%. Decline in 2015 was also less than originally indicated: -2.3% instead of -2.8% (the first estimate by Rosstat was -3.7%). The recalculation was associated with obtaining newly revised data.
  • In October 2018, public attention focused on published data on the real income of the population for January-June 2018, which, as per Rosstat, in the whole country rose by 2.4%. However, 6 out of 8 federal districts registered negative growth (from -1.6% to -0.4%), and the income growth of the population in the remaining 2 districts was +0.5% and +2.0%. The apparent contradiction in statistics was not explained in any way, and from early 2019, Rosstat switched to a new methodology for calculating population income and recalculated all data on this indicator from 2013. As a result, it turned out that in 2013-2018 real income decline was 8.3%, instead of 10.9% (previous estimate), and in 2018, the initial drop of 0.2% was replaced by a rise of 0.2%. Thus, growth rate of the real income indicator has been revised upward.
  • Rosstat’s recent upward revision of industrial production data for 2016–2018 also raised many questions. Instead of stagnation in the industry in recent years, new statistics began to show moderate growth. For example, at end 2017, Rosstat estimated growth in industry at +1.0%, but after the revision at the level of +2.1%. Similarly, data for 2016 were revised upward. It was an interesting coincidence that Rosstat was fully in line with the forecast of the Ministry of Economic Development published even before the final results of 2017 became known.

In 2019, Rosstat conducted a radical revision of macroeconomic statistics since 2014. The losses of the economy from the “sanction war” and the slump in world oil prices were exaggerated and the economic recession was slight and short-lived. According to newly recalculated data, there was neither a long economic downturn, nor a big recession in industry and construction, and 2015 was the only crisis year.

Large-scale revisions by Rosstat, the wide range of indicators that they affect, their upbeat nature (indicators are only revised upward) and the often insufficient or unconvincing argument behind raise doubts in all who use these data. Refinement of statistics and revision itself is a normal practice taking place in any country, any revision though should have a clear and understandable explanation, and if such adjustments frequently occur, the question of the quality of applied methodology for collecting and analyzing statistical data arises.

Periodic revisions of statistical data in construction and other sectors of the economy are not the only difficulties. There are weaknesses not only in the statistical office itself, but also in the whole system of collecting and publishing statistical information in Russia such as:

Continue reading Construction statistics or constructing statistics?

How Croatia’s government policies are impacting the country’s construction sector

Written by Michael Glazer (SEE Regional Advisors) and Tatjana Halapija (Nada Projekt), EECFA’s Croatian members

Croatia will at the turn of the year assume the rotating presidency of the Council of the European Union. So now is an appropriate time to assess how the Croatian government’s policies affect the country’s construction sector.

Source: Depositphotos

The government’s preparations for the presidency don’t inspire confidence that its influence is a positive one: the remodeling of the main building for the presidency won’t be completed until December 22, leaving no room for (further) delays. And there are concerns that the “finished” building won’t in fact provide satisfactory facilities. Not to mention the project’s being at least 50% over budget.

On the other hand, the current government has substantially increased Croatia’s absorption rate for EU funds. At 78% it is now slightly higher than the EU average of 77% and significantly greater than the country’s below-EU-average 2018 rate of 52%. This improved performance has enabled Croatia to invest massive amounts in infrastructure. And while, bureaucratic delays have meant that end users have received only 25% of the amounts they contracted for, much less than the 33% EU average, there is a real likelihood of even more rapid EU funds absorption in Croatia.

First, use-it-or-lose-it rules governing these moneys mean that contracts relying on them must be entered into before year-end 2020. Second, and crucially, presidential and parliamentary elections are coming up next year, by January 20 in the case of the president and by December 23 in the case of the parliament. Parliamentary elections, though, could be triggered far earlier if any of the minority members of the current, fragile coalition withdraws its support.

Continue reading How Croatia’s government policies are impacting the country’s construction sector

Q2 2019 Permit-completion results of EECFA countries

As all Q2 figures are available, our visualizations with the 8 EECFA countries are updated.

In the Balkans, 4 out of five countries are peaking in housing permits. Especially Bulgaria, Romania and Serbia are at outstanding levels. In the meantime, Turkey has touched further lows in Q2; the quarterly permit figure is hardly higher than that of Ukraine.

Discover the full visualization at Tableau Public
Turkey: housing permit-completion, source: TUIK, EECFA

Full visualization:
1. Residential permit-completion (number of dwellings)

Ukraine and Romania are also close to their recent peaks in non-residential permits; the level of these in terms of sqm is not exceptional, though. Serbia has the big story in non-residential. Around 2.6 million sqm of permitted space (in the latest 4 quarters together) is huge, 2.5 times higher than back in 2008.

Full visualization:
2. Non-residential permit-completion (floor area and number of buildings)

Serbia: non-residential permit-completion, source: SORS, EECFA

Sofia Office Construction: The Beat Goes On (For Now)

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

Bulgaria’s non-residential construction is set to grow in 2019 and 2020. The positive figures in the latest EECFA Bulgaria Construction Forecast Report are backed by, among others, the accelerated growth in office construction which is to witness the completion of many big projects in 2019-2021. The question is not on whether their delivery will impact the segment, but on how.

NV Tower, Balkan Business Center (left), Sky Fort (middle), Synergy Tower, Sofia Tech One,  Advance Business Center (right); Sources: www.markan.bg, www.advancecenter.bg, www.capital.bg, http://www.aaa.bg

As shown by the 2019 Summer EECFA Bulgaria Construction Forecast Report (which can be purchased here), non-residential construction in the country is to be on a growth path in 2019 and 2020, a major driver being office construction. After bouncing back in 2017, and keeping the momentum in 2018, it is relishing a real revival and is predicted to increase by over 10% on average in 2019-2021.

Office-related construction is mainly concentrated in Sofia where all major projects are located. The city is an attractive destination for companies that benefit from a favorable mix of skilled young population, competitive labor costs and rent levels to establish and expand in spheres linked to Information Technology, business process outsourcing and shared services. Companies in these sectors are active in relocations, often driven by their expansion plans and/or the rising preference of their employees for modern office premises.

Existing office space in Sofia totaled 2mln sqm at the end of 2018. In H1 2019 it witnessed the delivery of 100 000sqm and now looks forward to another 400 000sqm with an expected completion till 2021.

These dynamics are fueled by the peak in permitted office space registered in H2 2018 – an all-time high performance that by far exceeded the pre-crisis record of H1 2008 (265 065sqm).

In H1 2019 another 129 545sqm were permitted, which is still a rise of more than 90% y-o-y. It remains to be seen whether this data on permitted floor space will translate into the size of started office premises and, later on, in the number and volume of completed ones. H2 2015 recorded the peak in terms of started office floor space so far and if it is to be outperformed, H2 2019 and H1 2020 seem to be the perfect timing.

Against the backdrop of the latest development, the question is not on whether the delivery of all projects in the active pipeline will impact the segment, but on how. Demand is awaited to see logical limitations in the future because of skilled labor shortage being on the rise, the increased application of AI solutions and the changing behavior of office employees in favor of more flexible and remote work.

This altogether should keep the present rent levels in Sofia, or even put them under pressure. Rents did not considerably change over the last years and even now continue to be among the lowest in the CEE region. Thus, provided that all projects are delivered, office yields will be questioned. This scenario seems increasingly possible unless a new wave of major restructuring and cost-cutting takes place in countries with higher labor costs.

Turkish Construction Sector Seeking Ways to Reverse the Slump

Written by Prof. Dr. Ali TUREL, EECFA Turkey

Turkish construction is in crisis in more fronts. High interest rates due to high inflation cloud the situation of construction players. As well as this, high negative real housing price changes with real construction costs being in positive numbers are creating adverse market conditions for housebuilders. Construction companies active in civil engineering have decreasing workloads due to the October 2018 presidential decree not to tender new projects except for priority ones and due to the reduced available central and local budgets for projects this year. The construction sector in Turkey is seeking ways to come out of this crunch.

The Bosphorus Strait, Istanbul, Turkey – Source: Buildecon

 

How it all started

The colossal devaluation of the Turkish Lira, having started in November 2016, shook Turkey’s construction industry in August 2018. Even though construction costs and interest rates increased against the backdrop of rising exchange rates in 2017, there were exceptional historical peaks in construction and occupancy permits that year. The crisis hit in 2018 with construction permits in floor areas being almost half of the permits of 2017. Occupancy permits went up by 5% in floor areas though, due to the large backlogs of construction in almost every sector. Housing sales also climbed 5% and amounted to 1,409 million by end 2018.

Trends similar to 2018 in building construction and occupancy permits in floor areas continued in the first quarter of 2019 with a 37.7% shrinkage in construction permits and a 29.4% rise in occupancy permits. Annual rate of change in the Building Construction Cost Index decreased from 28.11% in January 2019 to 25.45% in May 2019. Since rates of change in Consumer Price Index were 20.35% and 18.71%, respectively, real rises in building construction cost in the same two months were a respective 6.4% and 5.7%.

Civil engineering projects have been battered by the presidential decree issued in October 2018 requiring all ministries not to tender new projects except for priority ones, on the one hand, and by the lower allocated budget for projects to central and local governments in 2019 than in the previous year, on the other. TUIK, the Turkish Statistical Institute, calculated a 10.9% drop in construction sector in the Gross Domestic Product (GDP) in the Chain Linked Volume Index in the first quarter of 2019 against the same period of 2018. 

Feeling the pinch

Construction industry in Turkey is much concerned with the changes in housing prices and sales since about three quarters of building permits in Turkey are for house building. National average of the annual change in the Housing Price Index accounted for 3.60% in January 2019 and 1.57% in May 2019, implying that real annual changes in housing prices in these months were -13,9% and -14,4%, respectively. High negative real housing price changes when real construction costs are in positive numbers are unfavourable market conditions for housebuilders. Furthermore, decreasing housing sales, by 21.7% in the first 6 months of 2019 and 48.6% in June 2019 compared to the same time periods of 2018, create additional strains in the housing market.

Continue reading Turkish Construction Sector Seeking Ways to Reverse the Slump

EECFA countries in the European Commission’s 2019 Macro Forecast

In Spring 2019, prior to the publication of the 2019 Summer EECFA Construction Forecast Report, the European Commission released its forecast for the economic prospects for EECFA member countries. Here is a summary of the main changes in prospects between Autumn 2018 and Spring 2019.

Written by Tünde Tancsics, EECFA Research, ELTINGA

Economic outlook is still better in the eastern region of Europe than in the rest of the continent, though it has slightly worsened in many countries of the EECFA region between Autumn 2018 and Spring 2019. The only exception among EECFA countries is Russia whose prospects have improved, as well as Hungary (covered by Buildecon in Euroconstruct) with almost 0.4 percentage points.

As Chart 1 shows, GDP growth in the eastern region is higher than the EU average, Turkey excepted where forecasted average annual GDP growth for 2018-2020 remains under 1.5%. As per data by the European Commission, economic prospects are the best for Hungary and Serbia that may see an increase in GDP by more than 3.5% annually between 2018 and 2020.

We have also examined Gross fixed capital formation increase in EECFA countries, in Euroconstruct member Hungary and in the EU. Chart 2 indicates that expected GFCF growth – as in case of GDP – is also higher in most EECFA countries. Moreover, the advantage of Serbia, Croatia, Hungary, Slovenia and Bulgaria is even bigger than the one experienced for GDP. GFCF prospects have greatly declined for Romania; average annual GFCF growth rate for 2018-2020 has shrunk close to zero by Spring 2019 from more than 5% in Autumn 2018. However, among EECFA countries Turkey is the only one where GFCF is set to decrease in 2018-2020.

Hungary is still leading in GFCF prospects with a nearly 10% projected annual growth rate. Slovenia ranks second and Serbia lines up third with both having an 8% growth rate. Hungary has come first in terms of predicted growth of construction investment (15%). Construction’s share in total investment in EECFA countries is between 57% and 65%, with Turkey having the highest rate. Romania also has a high rate of as much as 64%.

For construction segment level forecast, please check our reports that can be purchased on eecfa.com

EECFA 2019 Summer Construction Forecast

On 24 June 2019, the 2019 Summer EECFA Construction Forecast Report up to 2021 was published. Full reports can be purchased, and a sample report can be viewed at www.eecfa.com. EECFA (Eastern European Construction Forecasting Association) conducts research on the construction markets of 8 Eastern-European countries.

Southeast Europe

Good years are predicted to continue in the construction markets of Eastern and Western Balkan countries of EECFA. Altogether around 15% cumulated real growth is foreseen for the region as a whole in 2019-2021. The annual pace of growth, however, is gradually decelerating on the forecast horizon. In this upcoming period civil engineering is expected to outperform building construction in all countries, except for Romania.

Bulgaria’s construction output remains on a growth path since both building construction and civil engineering continue to expand. Residential construction is still an attractive investment due to increasing profitability on the back of a positive change in disposable income and low interest rates. Growth in non-residential construction is backed by the acceleration in office segment and a stable performance in manufacturing and warehousing. Civil engineering is to be driven by road and public utility segments, while major projects in railway construction are struggling to start. Construction output is projected to grow by 5% in 2019 and 4% in 2020. The end of the EU programming period of 2014-2020 will likely give and additional boost of 7% in 2021.

Construction in Croatia is at a crossroads. Some sectors that have shown strong catch-up growth will soon slow. Others, so far less favored, will soon benefit from such growth. The country is also at a crossroads in another sense. An aging population, continued emigration, rising construction costs and increased international competition for tourists will threaten a number of construction sectors unless wise political choices are made. All in all, though, while the forecast for the Croatian construction industry as a whole is not as sunny as it once was and while patches of cloud have begun to appear in some places, other areas are expected to enjoy significantly more favorable conditions than in the past.

Romania’s construction is set to grow by 6% in 2019. Residential construction, after a remarkable growth between 2016 and 2018, might be hindered by legal and policy changes. Despite some concerns over the contrary, residential activity is still predicted to remain one of the main drivers of the Romanian construction market, at least until 2020. Demand remains high for most types of non-residential construction as well. But talent shortages and higher operating costs would, likewise, limit the growth of the segment. Of notable interest is the expected growth in civil engineering segments which considerably dropped after 2015 but are to return to a positive trend with renewed interest due to availability of national and EU funding and increased public interest in the election years.

In Serbia the booming cycle is now encompassing practically all construction segments, with strong performance in both buildings and civil engineering. While residential and non-residential buildings were leading the growth in the previous period, civil engineering is expected to again take charge in 2019. With increased spending in road construction and major large-scale projects now underway in energy and railroad, there is a strong expansion of outputs in this forecast horizon. Although extensive growth in previous years already doubled outputs in many segments, particularly in buildings, there is yet more to come. Total construction output in 2021 will likely at least double the volumes from 2015.

Construction industry in Slovenia continues to grow fast, recording a second consecutive year of double-digit growth. Based on strong economic growth, easy access to credit and strong demand for residential housing, its foundation would remain strong also in 2020 unless a major external shock reversed the current optimism on the market. Even in such case, there are several large civil engineering projects, especially the construction of a new railway towards Port Koper that began in early 2019, that will induce growth in construction output for several years. 

East Europe

The East-European countries EECFA covers show a completely different picture from that of the Balkan. The cumulated growth expectation of the region is -1% for 2019-2021. Turkey’s construction market is in such trouble as previously predicted, and this drags down the whole region’s performance. On country level, only Turkey sees negative cumulated growth until 2021, while Russia is prognosticated to be moderately positive. And Ukraine can reach the highest growth rates. In each country civil engineering is forecast to perform better (less worse in case of Turkey) than building construction until 2021.

In 2018 Russia’s construction output registered a higher-than-expected growth of 2.4%, thanks to the partial revision of construction statistics and the completion of major infrastructure projects related to the FIFA World Cup. In 2019, though, with the disappearance of these two growth factors, construction output is set to be near zero. Forecast for 2020-2021 is more optimistic (2.8%-3.3% per year) as economic growth is expected to accelerate and state funding for the industry will likely have a major push. Civil engineering and housing construction will enjoy most state funding directed to new road and railway projects, energy infrastructure and residential real estate developers.

In August 2018 the economy of Turkey trembled owing to the massive depreciation of Lira that greatly hit many sectors, especially construction. Building permits also dropped sharply last year, after historical peaks a year earlier, but completion of buildings in terms of floor area rose by 5%. This trend continues in 2019, but housing sales declined by 20% in the first five months, together with large decreases in real housing prices.Further, building material output registered a more than 20% drop within a year until May 2019. Construction companies experience a hard time and those active in civil engineering have decreasing workloads due to the presidential decree (issued in October 2018) not to tender new projects except for priority ones. Plus, the budget to central and local governments for projects this year is less than last year. Against this backdrop, recovery in the construction sector can only begin in 2021.

The Ukrainian construction industry has all the conditions for a sustainable growth in the future by an estimated 6.8% rise this year, a 3.6% increase in 2020 and a 7.2% growth in 2021. A positive trend is the systemic state support for the industry, including more transparent and clear rules of the game in the construction market, simplification of permits, and powerful investment support, especially in civil engineering. Hindering construction industry, and the economy as a whole, though, is the lack of financing. The slight drop in residential construction is offset by the growth of non-residential and civil engineering subsectors.

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Source of data: EECFA Construction Forecast Report, 2019 Summer

Contact information: www.eecfa.com, info@eecfa.com

Serbia’s office trailing on beaten path

Written by Dejan Krajinović, Beobuild Core D.O.O., EECFA Serbia

office
Left: Business Garden; Top right: Sirius Business Center; Bottom right: Green Heart Source: Beobuild Core D.O.O.

Office has been struggling to sustain steady growth as its output performance surprisingly meandered in the previous period. Finally, investments are picking up, but will it be enough to improve market conditions?

Office construction

Although Serbia’s office segment has been enjoying positive developments during the ongoing expansion, its performance has been rather bumpy and below market expectations. The initial strong recovery of construction outputs in 2016 had a short breath and corrected back by a double-digit margin in the following year. This was not expected in any way since permit numbers continued surging unabated, while investment-wise all market conditions improved further.

Find out more about office construction in the EECFA Serbia Construction Forecast Report. Sample report

The sudden decrease in 2017 was largely caused by the delay in two major planned projects in Belgrade which had received their permits, but construction start did not follow as planned. With its small base and still recovering outputs, this was enough to produce a significant delay in new deliveries and sway outputs of the entire segment.

Serbia-office
Weak office stock growth during the last decade – Source: Beobuild Core D.O.O.

Unlike other regional centers, the Belgrade market is still underdeveloped and substantially behind in stock size owing to a delayed transition and the lack of institutional funds and developers from the EU that already invested in Central and Eastern Europe. Because the downturn of 2008 and 2009 reduced financing, most office projects have been developed in a pre-leased manner, thus keeping vacancy at a constant low and rents at a stable high. Consequentially, the costs of renting class A office in Belgrade can go 40% higher than its regional peers such as Zagreb or Sofia.

The construction of office buildings has again accelerated in 2018 and 2019, and the project pipeline is slowly entering realization, meaning that new deliveries should start increasing the modern stock by a significant rate in the coming period and vacancy could also temporarily increase. Having in mind the very propulsive take-up figures in the last three years, there is no fear of a prolonged vacancy at the moment. Belgrade is the largest market and there was only 10.000m2 of new stock delivered in 2018, making a tiny contribution to the total of 860.000m2.

On the other hand, several larger projects entered realization in the same period, so another GLA 120.000m2 is under construction in Belgrade and will enter the market in H2 2020. The gap between demand and supply is already very wide and although bigger projects entered construction, it will take time for new offices to become available. Furthermore, most new projects will be leased before or during construction, so, the effect, if any, on the rent costs should be very limited in this cycle. Pressures on the demand side are set to remain strong in mid-term, so more investments will be necessary if Belgrade is to keep its regional competitiveness.

Continue reading Serbia’s office trailing on beaten path

EECFA 2018 Winter Construction Forecast

EECFA (Eastern European Construction Forecasting Association), conducting research on the construction markets of 8 Eastern-European countries, released its 2018 Winter Construction Forecast Reports on 5 December 2018. Key findings are summarized below. Full reports can be purchased, and a sample report can be viewed at www.eecfa.com.

In many previous forecast rounds we have argued for a soft-landing scenario in Turkey. However, the dramatic fashion of the currency depreciation in summer 2018 unearthed many structural problems of the construction industry and made us revise our forecast to an even more pessimistic one. Unlike the stop-and-go like reactions to previous crises, we tend to believe in a stop-and-stay scenario this time. In Russia, we are less pessimistic thanks to a recently announced governmental program expected to affect the market positively.

EECFA-EE3

Optimism still prevails in the Eastern and Western Balkan countries of EECFA. For the region as a whole the new forecast sees just a little downward revision. However, on country level, the stories are different. Less optimism in Croatia and more optimism in Serbia and Slovenia compared to the previous forecast round. In Romania, the largest construction market of this region, the outlook of the building construction submarket has been adjusted downward.

EECFA-SEE5

Bulgaria. Construction output in Bulgaria is speeding up with an expected growth of 7.4% in 2018. Residential construction continues to expand on the back of increases in economic activity and real disposable income, and historically low interest rates on housing loans. Additionally, the non-residential segment is also predicted to grow driven mainly by office and industrial constructions. Civil engineering construction has continued its recovery path in 2018, Continue reading EECFA 2018 Winter Construction Forecast

From gloom to boom: Serbia’s residential

Written by Dejan Krajinović, Beobuild Core D.O.O, EECFA Serbia

Residential construction in Serbia is performing extremely well, and the long-awaited recovery is now well underway, with 2018 volumes again surpassing initial expectations. The situation on the market has been brewing for some time, with a strong investor confidence as well as very favorable financial conditions fueling expansion.

There has been a steady growth in construction activity for 4 years in a row now, but this trend has all the necessary conditions to sustain these levels and produce more growth in the coming years. Housing construction is flourishing, being already one of the best performing sectors in the overall building construction.

New projects are lining up, boosting permit numbers to record levels. Although it is expected for permits to hit the roof in 2020, the amount of permitted homes will certainly drive this growth cycle for several more years.

Top: Belgrade Waterfront/St.Regis Tower; Bottom left: Skyline complex; Bottom right: West65 tower – Source: : Beobuild Core D.O.O

Serbia’s residential market though is coming from a very low-end of its potential – hitting historical bottom after a long and very deep recession that ended in 2014. With such a small basis at the time, an upswing was expected in construction volumes, but the current strength and speed of the recovery seemed too optimistic.

Investment activity has accelerated, with the strong contribution of both domestic and foreign investors, creating a real boom in the construction of multi-unit buildings. Investors from around the world have already entered the market, particularly Belgrade’s starved luxurious segment and yielding high-end residential projects. The competition of large-scale projects by international and domestic investors is bringing a whole new level of market sophistication, with different services, features and amenities.

The most notable is the Belgrade Waterfront development, a large-scale re-urbanization of the banks of the Sava River in Central Belgrade, covering 80ha of prime construction land. This project is a joint venture of the Republic of Serbia and Abu Dhabi-based investment fund ‘Eagle Hills’, estimated to be worth more than EUR 3bln. Continue reading From gloom to boom: Serbia’s residential