Ukraine bounces back

The Ukrainian construction industry is estimated to have bounced back in the first half of 2016 after a very difficult few years, with expansion of 9% year-on-year after a 26% contraction recorded in the same period a year earlier.

Research firm PMR said that despite the sharp economic contraction in Ukraine in 2014 and 2015, the prospects for the Ukrainian construction industry remained relatively good in the medium to long term.

It added that this was taking into consideration that most of the country’s production facilities were in need of reconstruction or extensive modernisation, and that the same could be said for transport infrastructure.

Between 2008 and 2015, the Ukrainian construction industry expanded year-on-year in real terms only once, in 2011, said PMR, with double-figure market reduction recorded in each year between 2013 and 2015.

It said that the construction industry in Ukraine was set to resume growth in 2016, though it was unlikely to expand by more than 5% year-on-year in real terms.

‘Nose-dive’

The positive trend will resume largely because of a very low statistical base effect, said PMR, after a “nose-dive setback” between 2013 and 2015, when the construction industry recorded double-figure reductions each year.

Improving economic growth figures were said to have contributed decisively to the rise in the construction confidence indicator in Ukraine.

In the second quarter of 2016, the industry’s business confidence index improved in comparison with the previous quarter, rising to the highest level in more than two years. In addition, the difference between the proportion of companies which predicted an increase in the number of employees in the short term and those foreseeing a reduction was at the highest level in more than eight years, according to PMR’s survey.

It also found that producers of most building materials were seeing higher demand for their products, primarily because of the growing demand from infrastructure development projects.

Sizeable support has also been provided by a reviving private sector, which has been encouraged to roll out new construction projects thanks to the improving economic environment and consumer purchasing power, said PMR.

In the first half of 2016, production of cement increased by 11% compared to the volume manufactured during the same period a year earlier. Higher numbers were also recorded for the production of dry building mixtures – up 7.2% – and ready-mixed concrete – a rise of 20.8%.

Non-residential

The survey found that in the first half of 2016, the encouraging increase in total construction output was fuelled by a solid performance of the non-residential subgroup, which surged year-on-year by 11.2%. PMR said the boost in non-residential construction activity was complemented by a 10.7% expansion in residential construction and a 7% recovery in civil engineering output.

It said that despite the sharp economic contraction in Ukraine in the last couple of years, the number of new homes commissioned in 2015 increased by 14.4% year-on-year to 120,300 – which PMR said was the most substantial annual housing registration result ever recorded in Ukraine.

The total floor space of residences officially activated in 2015 was said to have surged by 13.4% to 11 million m², again the highest figure ever recorded in Ukraine.

PMR said it was worth noting that the previous highest yearly housing completion figure ever recorded in Ukraine was that of 2008, with 10 million m².

The increase recorded in 2015 followed a 2.1% reduction logged a year earlier, a slight 1.8% increase achieved in 2013 and a more impressive figure of 12.5% achieved in 2012.

Temporary Order

However, PMR said it should be remembered that of the total floor space commissioned since 2010, a substantial proportion had been registered in accordance with a Temporary Order, which made it possible to register residential buildings completed since August 1992 without a building permit in place. It said this meant that without this order in force, the amount of housing floor space completed would have been lower.

In 2014, 2.1% of the 9.74 million m² of all floor space put into use was registered in accordance with the Temporary Order. PMR said that if new completed space in 2014 had been considered alone, it would have accounted for about 9.54 million m², which is 27% more than the amount of residential space completed in 2013.

The substantial increase in the number of newly completed properties recorded in 2014 largely reflected the fact that many delayed projects were finally completed in 2014, said PMR, adding that encouraging signs of economic recovery seen in 2011 and 2012 had been motivating developers to speed up residential construction activity.

In 2015, 16.5% (1.82 million m²) of all newly registered housing space was based on the Temporary Order and the remaining, 9.23 million m², was accounted for by properties completed in late 2014 and 2015, it said. PMR found that the new supply in 2015 contracted by 3.3% in year-on-year terms, although the total space registered in 2015 increased 13.4% year-on-year.

PMR said that at fewer than 25m², Ukraine’s per capita housing stock was significantly smaller than in most European countries, where this parameter was more than 30m².

It said this difference supported the long-term growth potential of the residential construction market in Ukraine.