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The construction market in Poland- current state and future perspectives

Published: 10.07.2013

The total value of the construction market in Poland has decreased in the first months of 2013 in relation to 2012, in line with experts’ forecasts. „Next year is expected to bring stabilization, while in 2015 the market will likely start recovering.”

Polish construction market in 2012.

The total value of the construction market in 2012 decreased by 0.6% in relation to 2011. The number of buildings built decreased by 1.3% y/y and the number of specialized construction by 0.7%, whereas civil and water engineering construction increased by 0.5% last year, according to the Central Statistical Office (GUS) data released in late June. In 2012 ca. 152,000 new apartments were built, ca. 141,000 were under construction and ca. 162,000 were given a construction permit. In 2011 the figures were respectively: 131,000, 162,000 and 184,000.

The bankruptcy rate of the construction companies increased last year with around 270 companies on the construction market declaring bankruptcy, mirroring their deteriorating financial situation.

2013 tough for the sector, yet chances for improvement are in perspective.

If the decrease of construction market reaches 8-10% in 2013 we can speak of success, professor at Chodakowska University in Wroclaw, Zofia Bolkowska commented. In Q1 construction output decreased by 15.1% y/y, according to Central Statistical Office (GUS) data.- In the subsequent months of 2013 declines were even deeper – construction output dropped by 23.1% y/y in April and by 27.5% in May, GUS data show.

Despite the decrease, the experts hope for improvement in the upcoming months. The business leading index for construction market increased by 45pts in Q2 2013. In relation to Q1 it is currently +0.2 pt. “Index’s increase in Q2 in relation to Q1 results from the seasonal character of the construction market, it is, however, exceptionally high at the moment. Similar growth could be observed in 2002 and 2003, when the construction industry was recovering from the an economic collapse. The high index value results in the reversal of the trend function. The current results are surely satisfying, yet they should be treated as positive one off, not a permanent change- the report of the Research Institute of Economic Development(IRG) reads.

Business indicato – Q2 2013

Source: Warsaw School of Economic

The industry slowdown is affecting other branches of the economy, including the steelwork industry. “The steelwork industry is interconnected with the construction industry, therefore it is experiencing the slowdown as well. The profits of some firms are decreasing by up to 30% y/y. The demand for steel construction in Europe is low,” said Marcin Siwa risk analysis director at market researcher Coface in June 2013.

Polish construction market is negatively affected by the economic situation in Europe, EU’s financial problems and the collapse of the construction market in Spain, Robert Dziwiński, head of construction sector watchdog GUNB said in May. “It turned out our companies are not mentally and legally prepared to realize contracts for highway construction,”. said the inspector.

The situation is similar when it comes to housing development. “Developers, on the other hand, speak of the collapse of the housing market and complain of no movement on the demand-side. They tend to forget about the over-investments of 2009, when they were buying large areas of land for housing construction. Back then, according to the experts, the supply exceeded the demand”- he added.

Additionally, Dziwiński points out, factors hindering the investments in the sector include prolonged decision procedures regarding the terms of projects’ development as well as excessive regulations in a variety of institutions, according to the inspector.

2014 stabilization predicted. Recovery shouldn’t be expected until 2015.

“2014 is to bring the market stabilization, yet sector recovery can be expected in 2015 only if there is no crisis in global finance,” said Dziwiński. The inspector also emphasized the role of the EU funds for 2014-2020, which will give a boost to the sector.

Coface experts concurs. “2013 will be a year of calming but also a year of change. We’re expecting a recovery of the construction market in 2014, with the emergence of projects funded by the new EU budget. The companies, richer in experience, stopped reducing their profit margins. Thanks to that, we’re experiencing an improvement in profitability of the contracts and solvency of the market companies” Siwa said.

Source: Central Statistical Office (GUS), prepared by PAP

The market situation is expected to improve already in Q3 2013, especially in relation to the increasing size of the production. The situation of the construction companies’ investments is likely to remain unfavorable in the rest of 2013.

Polish construction sector could also benefit from governmental programs like the recently launched investment-support program “Polish Investments” (“Inwestycje Polskie”), professor Bolkowska claims.

Source - Polish Press Agency, Economic Servic

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Published by: Łukasz Sawa
Author: Public Relations Office
Last change: 10.07.2013 Łukasz Sawa
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