Slovenia rebound predicted

06 September 2012

The Slovenian market has hit such lows recently that economic research company Buildecon feels a rebound is likely in 2013.

Following a boom in 2007 and 2008, Slovenian construction was one of the hardest hit markets in of the European Union. It even fell below the levels recorded before the boom and performed way below what Buildecon regarded as its potential.

The slump in the Slovenian residential market appears to be continuing, said Buildecon. It reported that there was still a massive stock of unsold and empty dwellings on the market, which prevented the restoration of the residential construction.

The demand for dwellings is hindered by the difficult mortgage market conditions as a result of the banking crisis in Slovenia.

Most potential buyers of residential property are expecting considerably lowered property prices. They have been on the decline since 2008 in real terms, but they still remain higher than had been thought.

With a lack of demand and a huge stock of unsold apartments, there is no need for increased supply. Buildecon said there were almost no professional real estate developers left.

It forecast that the market would stay depressed until 2014, dominated by individual residential developments, and would continue to represent a drag on construction activity for several years.

The non-residential construction sector, said Buildecon, had been closely connected to the overall investment climate of the Slovenian economy. While it has suffered a lack of construction investment, it should return to growth as soon as investment expenditure is reactivated, predicted the research company.

It added that this would depend on public, as well as private investments.

"As the government is predicting massive public investments into some segments, (often financed from the EU Cohesion Fund), non-residential construction might bottom out in 2012 and grow afterwards," it said.

Civil engineering investments were hammered not only by the recession, but also by the completion of the largest civil engineering programme in the country's history - the highway network construction, said Buildecon.

It felt the network's completion had been going to represent a huge drop in civil engineering, and by coinciding with the onset of the economic turmoil, the effect was far worse.

"However, as several civil engineering projects are forecast to be launched in the near future, the sector might be the first to see a recovery. This will depend on the availability of finances for high-volume projects. Both public and private investors will be needed, but the worsening of the crisis - risky environment or lack of funds - could lead to their reluctance to invest."

Nevertheless, it seemed to Buildecon that it would be more likely that at least a few large-scale civil engineering projects would start over the forecast period, turning around the fortunes of the whole construction industry in Slovenia.

It said this would mean that construction activity in Slovenia would be out of the depression by 2014, although it would remain far below the levels reached in 2007 and 2008.

Buildecon's latest report is called Slovenian Construction Until 2014.

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