Eastern European pessimism

Having reached new highs in 2014, the outlook for the Eastern European construction market is not looking as positive, according to the EECFA Summer Forecast.

The construction forecasting research co-operation of eight Eastern European national research institutions – Bulgaria, Croatia, Romania, Russia, Slovenia, Serbia, Turkey and Ukraine – found that Russia was the main country dragging the figures down, but that Ukraine was also responsible.

It said that Turkey and the Balkan countries would not be able to counterbalance the expected loss.

Looking at building construction in Turkey, EECFA’s projected scenario was “a soft landing”, with smaller annual growth rates than in the recent past, and it said it was maintaining its earlier forecast of some small setbacks in the residential market on the horizon.

Led by Romania, the mood in the Balkan countries was said to be heading into more optimistic territory.

EECFA said, “After many years of a depressed state, the recovery is definitely unfolding. At the other end, Russia and Turkey, where growth returned soon after 2009, and markets have expanded since then, the mood is turning towards the pessimistic.”

In Turkey, there is no growth predicted, but in Russia two negative years are projected for the building construction market.

Although facing a negative outlook, EECFA said Ukraine was more of a hybrid of the positive and negative groupings. It said the country had been affected by a series of crises since 2009, but added that different, coinciding factors, had led to the residential market looking lively in 2014. EECFA said that forecasting this segment had caused it the most contemplation.

“Examining the possible scenarios on the residential construction market in Russia and Ukraine,” said EECFA, “we think that the path will be quite different.

“Although the economic slowdown is less severe in Russia, the market segment could see a bigger drop – in the short- to mid-term – than the one in Ukraine.”

It said the reasons lay in the different states of the segments in the two countries, and the way the drivers that led them to this state were changing because of the shock that had been experienced.

EECFA pointed out that the 1.12 million dwellings completed last year in Russia was a very high level even in relative terms. This represented a 1.8% renewal rate – housing completion per housing stock – which is the second highest in Europe after Turkey. On the other hand, it reported that in Ukraine, the renewal ratio last year was only 0.5% – the lowest third in Europe.

It said that from that level, it expected the market to shrink moderately this year.