Romania still not out of slump

17 February 2012

Building construction and civil engineering in Romania, courtesy of Buildecon.

Building construction and civil engineering in Romania, courtesy of Buildecon.

While total construction in Romania recorded only a slight drop in 2011, the massive decline of roughly 42% in real terms in residential construction between 2009 and 2012, mean that it will be 2013 before total new construction and total renovation figures regain the levels of the pre-crisis year of 2008.

According to economic research company Buildecon, construction companies in Romania are looking forward to the announcement of new public tenders and the launch of large projects.

Substantial amounts of EU funding are available for the development of the country's infrastructure, but it will take time for the new Romanian government to gain the necessary expertise to use the money effectively, it said.

In 2011, the residential market could not recover after the huge reduction witnessed in 2009/2010, even though it settled down to a 6.8% slump on an annual basis.

Buildecon said the residential subsector would be the last to see a return to growth. One reason for this is the shrinking number of building permits, which is a trend that is projected to continue into the first half of 2013.

"Even if prices go further down, they might not bring recovery to the market in mid-term," said Buildecon, "as the price rise during the peak period was hugely speculative." Between 2010 and 2014, residential construction is forecast to sink to a share of around 26% to 28% of total construction output, whereas from 2014 on, the improvement of macroeconomic stability in Romania might mean a rapid expansion in the subsector.

Non-residential is the sole subsector to have registered an upswing in 2011 - by about 10% at constant prices.

Buildecon said that since it expected the completion of many office and retail projects between 2012 and 2014, it foresaw the segment keeping its momentum over the next few years.

However, investors and developers in Romania are beginning 2012 with what Buildecon described as "a fluctuating pipeline depending on both domestic and external factors" as a result of the lowered private consumption in the country, the uncertainty resulting from the sovereign debt crisis in the Eurozone, and the development of key export markets.

It predicted that in the next few years, the market would see a further mixture of completions, delayed projects and schemes waiting for better market conditions.

Buildecon expects civil engineering to exceed its pre-crisis level in 2012 and to remain on a solid growth path in 2013 and 2014.

In the background is the secured financing provided by the EU structural funds. In addition, the government is looking for investors for large-scale projects outside the scope of the EU's operational programmes.

"On the whole, we expect growth to make a comeback to the Romanian construction market in 2012, with transport projects, particularly motorway constructions, enjoying extra funding," said Buildecon.

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