Slovak residential optimism

11 April 2012

Residential and non-residential construction are expected to be the major drivers of the Slovak construction market in the next few years, according to research company PMR.

It added that the engineering sector was likely to feel the consequences of the country's delays, and lack of proper preparation and planning for civil engineering investments - particularly in the road construction field.

PMR's latest report, Construction Sector in Slovakia 2012 - Development forecasts for 2012-2014, said that non-residential construction would witness a rising trend and would be the most stable segment of the Slovak construction market.

It said that in 2012, the industrial, logistics and retail sectors would come out of the painful slump they experienced in 2010/2011, as several major projects were expected to be completed this year. Office construction was also expected to be a larger growth contributor. However, PMR felt there was major potential yet to be exploited for development in both the industrial and office sectors outside the capital, Bratislava.

An improvement is also expected in residential construction, which in 2011 sank to levels not seen since 2006 - the year before the residential boom in the country. In 2011, it also saw signs of recovery as a spate of developers announced new projects or decisions to resume older projects postponed during the economic crisis.

PMR said that although the Slovak mortgage market was still underdeveloped, it had grown constantly in the past three years from €5.2 billion in 2009 to over €6 billion in 2011.

The report said that with interest rates going down and increased certainty arising from the country's switch to the Euro - compared to neighbouring countries, where it said the currency risk had played a role in restraining further growth of the mortgage markets­ -the Slovak market had not experienced any decline in the mortgage market during the past three years.

As a result of these new developments, PMR analysts expect a return to growth in the next few years. However, it added that this would not push up the Slovak residential construction market to particularly high levels as they were adding to a very low level of output. Residential output in the country is, therefore, not likely to reach the record high of 2007's €1.7 billion before 2014.

This year, the civil engineering sector is likely to feel a hangover from the delays and lack of proper preparation and planning for civil engineering constructions, and this is particularly so in the road construction field.

However, because of its vast size, road infrastructure construction is expected to remain the major part of civil engineering construction in Slovakia for the next few years.

Nevertheless, PMR said it should be noted that even in the most optimistic scenario, with most of the planned road constructions actually beginning this year, total output in this segment was expected to suffer a decline. It said many tenders were still to be organised, most of the projects were yet to be started, with a mere 5km of motorways expected to be completed in 2012.

As more of the transport infrastructure orders kick in, recovery is expected to help this sector to return by 2015 to the value of output it registered in 2008, before the economic crisis erupted.

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