Construction and Infrastructure
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Iulie 2010 |
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INTERNET SECURITIES ROMANIA S.R.L. |
Adresa
Strada Daniel Barcianu, Nr. 36
Etaj 1
030901 Bucureşti, Sector 3
Telefon
+40-21-326.11.96
+40-21-326.11.97
Fax
+40-21-326.11.99
Website
www.securities.com
February 2010
Construction sector overview
Construction works plunge 15.1% y/y in 2009
The construction works index plunged by 15.1% y/y in 2009, according to data from the statistics office. However, the construction works in 2009 were still 66% above 2005 and the 15.1% y/y decline has not offset yet the 26.9% y/y advance in the year before – therefore the volume of works was still above the level in 2007.
The index shrunk by 17.2% y/y in Q4, which is a better performance than the 21.6% y/y plunge in Q3 but still witnesses an ongoing permanent correction that has not yet ended. Scarce financing forced developers to narrow and optimise their operations in 2009 and the general prospects have not improved yet. The large public investments in infrastructure that were expected to alleviate the decline of the construction sector remained mostly on the project level, amid bureaucratic obstacles and political turmoil, while the state-backed home loan scheme and the programme of thermal rehabilitation of dwellings have been slow.
As long as bank financing remains thin and the investors' risk aversion is still high, the situation is unlikely to improve. Furthermore, given this year's budget constraints, the public works might also be financed scarcely in 2010.
Building permits drop 20.1% y/y in 2009
The number of building permits for residential buildings dropped by 20.1% y/y to a total of 48,833 in 2009, according to data released by the statistics office. The most significant decline was registered in Bucharest-Ilfov area (minus 3,015 permits), followed by Central Romania (minus 1,974 permits) and South-Muntenia development region (minus 1,884 permits).
Construction materials market shrinks 20% y/y to EUR 4.5 bn in 2009
The construction materials market shrank by some 20% y/y to EUR 4.5 bn last year, according to estimates of producers' association. All the segments were affected by the stall of private projects, while the large public investments expected to alleviate the decline of the construction sector lingered among bureaucratic obstacles and political uncertainties.
Cement consumption narrowed by a third on an annual basis in 2009 and cement makers started to stall production and send personnel in technical unemployment, after in the past years the plants worked even during the winter holidays to cover the demand. The sales of concrete prefabs also dropped by 22.2% y/y in volume and by 35.5% y/y in value terms last year, as works at commercial centres, shopping malls, office buildings and logistic units diminished significantly.Sales of ceramic bricks shrank by some 35% y/y to EUR 155 mn in 2009. The brick market has been the most affected by the economic decline. Residential construction plunged last year and the prospects are bleak – permits for residential buildings dropped by 20.1% y/y in 2009.
The sales of autoclaved concrete bricks declined by 10% y/y to EUR 180 mn last year. In volume terms, sales of autoclaved concrete bricks narrowed by a third on an annual basis.
The construction materials market is not expected to see any revival in the short run, as foreign investments, abundant in the past years, are now rare, while public works are financed scarcely, given the budget constraints. Nonetheless, there are hopes for recovery in the second half of the year, when the country's economy is expected to return in the positive area and foreign investors might regain confidence and return on the local market.
Real estate market reaches standstill in all segments last year
The real estate market reached almost a standstill in all segments last year. The number and the value of transactions were low, as the uncertainty regarding the evolution of the economy, as well as tight and expensive financing kept aside both foreign and local investors. Currently, most projects are stalled, while the ones still going on are witnessing delays.
Residential real estate prices plunged by some 30% y/y according to market estimates, but even so there were very few transactions. The authorities' attempt to somehow revive the market through a home-loan scheme did not have the intended impact. In some larger cities such as Constanta and Cluj, developers operated important price cuts and average prices of newly built apartments were lower than those of apartments in old buildings.
The commercial segment also had to adjust to shrinking demand. The new supply of retail and logistics spaces lowered significantly last year. An increasing number of retail and office projects are delivered without being pre-leased. The office market became a tenants' market last year. Demand came mostly from tenants looking to relocate after downsizing activity and cutting expenses, but even so there were few transactions and the surfaces involved were smaller.
Activity on the real estate market is rather sporadic at the moment, but as the economy is expected to return to growth in the second half of the year, the foreign investors are expected to return on the market.
