PMR Report: Impressive Growth in the CEE Construction Sector

According to a report just released by PMR, in 2005-2006 the construction market of Central and Eastern Europe (CEE) will expand at an impressive annual pace of 8-10%. Robust sector performance will be posted by all countries in the region, though Russia stands before the best development prospects.

(PRWEB) July 25, 2005 -- The Polish consulting and research company PMR has published a new report, The construction sector comparative analysis 2005-2006: the Czech Republic, Hungary, Poland and Russia". The study analyses the condition of the construction market in the region of Central and Eastern Europe (CEE).

In the report CEE is defined as Russia, Poland, Hungary and the Czech Republic.

According to the PMR report, the CEE construction market will expand by more than €32bn in the next two years to total €109bn at the end of 2006. Naturally, Russia as the regions largest construction market with an estimated value of ca. €41bn, is nearly 14% bigger than all the remaining CEE markets put together. According to PMRs projections, its size advantage will shrink slightly in the next two years to 12% as at the end of 2006. Poland is home to the second largest CEE construction market. Remarkably, despite the fact that the Czech Republic and Hungary have similar populations, the former has a more than 70% larger construction market than the latter (based on 2004 data). PMR forecasts that in the next two years the Czech advantage will deepen further. As at the end of 2006, Russia will continue to be the largest construction market in the CEE with Poland remaining in second place.

In 2005 2006, the individual construction markets will develop at an average annual rate of 8 11%. In the opinion of PMR analysts, such sizeable and stable growth means that the sector is at the start of an uptrend. The sector will experience growth not posted in years, particularly in Poland, where construction output has seen a downtrend in recent years (in 2001 2004 average annual changes in construction output sold ranged from -8% to 2%). Yet, PMR analysts point out that, in contrast to construction industry development in recent past, there will not be any significant variations in the rates at which the individual construction markets will expand in the near future.

The upcoming years will bring most decisive growth to the Russian construction market: average annual growth of close to 11%. At the same time Poland, the Czech Republic and Hungary will see their markets expand at around 9-10% per annum.

According to PMR, in the next few years the following factors will be most material to the dynamic development of the construction markets in the individual countries of the CEE region:

•    Civil engineering construction development, particularly dynamic in new EU member countries, the Czech Republic, Poland and Hungary. Fuelled by an influx of EU funds, the bulk streamlined to the engineering construction sector to finance the construction and modernisation of the national road and rail infrastructures. Underdeveloped road network and a lack of modern connections and below-standard road quality creates an opportunity for civil engineering to become the powerhouse of the entire construction industry in the near future, not only in Russia but in the entire CEE region.

•    Residential construction development, which when compared with the EU states is below standard in the Czech Republic, Poland, Russia and Hungary both in terms of quantity and quality of available housing. This opens a window of opportunity, particularly for construction companies specialising in renovation work. Furthermore, the CEE countries trail much behind the EU-15 in home completion statistics. This is also an area for sizeable prospects for construction companies, especially within the context of the noticeable housing deficit prevailing over the entire CEE region.

•    Non-residential construction market will also contribute towards growth in the construction sector, though less than the above segments. Though the CEE countries are no longer offering as attractive rates of return on capital invested in non-residential construction than even a couple of years ago, the sector will continue to expand with dynamism, especially in Russia. Nevertheless, its percentage share in the value of the total construction market is in for a marked drop," Marzena Opalinska, PMR analyst, concluded.

Though the above trends hold true for all countries in the region, there are obvious differences among the individual construction markets. What makes each unique is the subject of analysis in individual construction market reports on the Czech Republic, Poland, Russia and Hungary, which PMR has also recently released.

According to PMR, the key features of the CEE construction markets are:

•    The Russian construction market is in many ways underdeveloped in comparison to its counterparts not just in the EU but also in the CEE region. The country has serious deficits in housing, modern non-residential construction as well as civil engineering construction. Concurrently, the percentage share of the construction industry in the Russian GDP stands highest in the CEE region. The countrys prospects for future development in construction industry are best from among all analysed countries.

•    The Polish construction industry has been amidst a crisis in recent years. Yet there have been signs of a gradual improvement since 2003. More is being invested in the sector and more construction permits are being issued for residential buildings. This translates into higher sales for construction companies. Poland has sizeable deficits both in housing and -- especially -- in infrastructure. The latter segment stands to benefit the most from the greater inflow of EU funds and, thus, will continue to be the main engine behind the expansion of the Polish construction market.

•    The Czech Republic has the most developed construction market in the CEE region. The per capita value of sold construction is highest among the CEE neighbors as is worker productivity in the sector. The Czech Republic is also at the statistical forefront in motorway quality, quantity of modern office space per capital-city resident, as well as in availability of basic utilities at homes. Nevertheless, the Czech construction market is still a field of great opportunity for construction companies, inter alia in residential construction sector.

•    The Hungarian construction market leads the region in terms of new housing. It may boast of more per capita home completions than any other country in the region. It has the most developed housing loan and mortgage system and the best construction permit statistics in the region. At the same time, in the last couple of years the situation in the sector has been very unstable, with sizeable fluctuations in data on sold construction output. Yet, this market holds great potential since the percentage share of the construction sector in the GDP is the lowest in the CEE region, significantly below the EU averages.

To summarize, the PMR report speaks of impressive prospects for future development of the CEE construction market. According to its authors, the current condition of the residential, non-residential and engineering construction sectors in the analyzed countries is in many ways below that of the developed construction markets of the EU 15. For this reason, future of the CEE construction market looks very good, better than for the EU.

You are welcome to contact the authors of the report:

Szymon Jungiewicz, Construction Analyst

PMR Publications

tel. (+48 12) 410 21 18

szymon.jungiewicz@pmrpublications.com

Marzena Opalinska, Construction Analyst

PMR Publications

tel. (+48 12) 428 03 60

marzena.opalinska@pmrpublications.com

More information about the report:

Marketing Department

Tel. (+48 12) 428 03 61

e-mail: marketing@pmrpublications.com

About PMR

PMR Ltd. www.pmrcorporate.com is a publishing, consulting and market research company providing information, advice and services to international businesses interested in Central and Eastern Europe. With highly skilled staff, top ranked web sites and 10 years of experience, PMR is one of the largest companies of its type in the region.

PMR

ul. Supniewskiego 9, 31-527 Krakow, Poland

tel. /4812/ 428 03 60, fax /4812/ 413 40 12

www.pmrcorporate.com

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