Russia and Turkey lead the way

By Sandy Guthrie01 October 2013

chart courtesy of EECFA

chart courtesy of EECFA

Around €250 billion was spent on construction in the region made up of Romania, Slovenia, Bulgaria, Russia, Serbia, Ukraine and Turkey in 2012, according to the Eastern European Construction Forecasting Association (EECFA), which organised its introductory conference recently in Moscow, Russia.

EECFA is a construction forecasting research co-operation of seven Eastern European national research institutions covering those countries.

It found that Russia and Turkey had best overcome the effects of 2008, and were currently still in the prosperity phase of the cycle. EECFA said this would most probably remain unchanged until 2015, assuming that macro conditions stayed favourable after some deceleration in Turkey during 2012, and in Russia during 2013.

The morning lectures at the international conference centred on the construction sector analysis for the seven countries, with forecasts until 2015.

The afternoon session was dedicated to the construction market in Russia. A round table discussion took place with the heads of several building material and component providers' associations.

The conference ended with a lecture on EECFA’s forecast methodology. It was pointed out that EECFA followed a centralised methodology to ensure comparability among these markets.

Russian construction

Conference visitors were able fill out a survey on the development and forecast of some construction segments in Russia. The EECFA said the results of the conference survey indicated that visitors largely held the same opinion as it did.

It said, “Participants agreed with our positive forecast on the segments of residential construction, office construction, industrial buildings and warehouse developments. Similarly to us, they also think that retail market has even more potential in Russia. Furthermore, like us, they also believe that residential renovation is becoming more important in Russia."

The EECFA added, “On the other end of the cycle are almost all other countries – waiting for the recovery. Many signs suggest that recovery is already there in Romania, where all three sub-sectors could grow from this year on. In Ukraine, the fourth largest market, the residential sector could be the first to turn positive.

“Bulgaria is expected to see some comeback in non-residential and drop in civil engineering. In both Serbia and Slovenia, the biggest story could be civil engineering in the coming years.”

The EECFA said that it should be noted that it made its analysis by segment, so that, for example, in non-residential markets where both market-driven and publicly-funded projects can be found, very different stories could occur. It said that the overall sub-sector level view might not necessarily be true to all segments within the sub-sector.

1.4 million homes

In the region EECFA covers, around 1.4 million homes were completed in 2012, which it said was more than elsewhere in Europe.

In the two leading countries, it said the renewal of stock – described as the newly completed homes per stock – was huge, “way above 1%”.

It said that in both Russia and Turkey, unlike smaller countries, the current renewal figures were above their seven-year average. “That may indicate some sign of overheating, but in both countries there are good reasons to believe that for some years at least, the current huge levels are sustainable.

“Better still,” it added, “some growth is also predicted. In the short run, permit figures and increasing investment motivation (home prices are growing faster than construction costs) support this outlook, while in the longer run, the expected real income growth, and especially in Turkey the demographic trends, make us believe in this favourable scenario.”

It noted that in both countries, governments had an influence on home construction. In Turkey, the recently-announced start of earthquake-resistance renewal, and in Russia, the strategic aim of enhancing housing conditions, gave further support to this thinking, said the EECFA.

“We see encouraging signs in Ukraine and Romania also, while in the rest of the countries we are less optimistic,” it added.

EECFA provides construction market players with the market information and forecasts on the seven Eastern European countries. Its reports are updated half-yearly.

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