The continuing decline in construction production is mainly due to weak demand, which is being reduced by expensive loans. According to analysts, the outlook for the future is uncertain and the year-on-year decline in the number of building permits issued does not indicate a change in the trend. According to data released today by the Czech Statistical Office (ČSÚ), the year-on-year decline in construction output accelerated to six percent in March from 4.3 percent in February.
“The decline in construction production points to weaker demand and new orders do not promise any quick turnaround yet. While there are more of them in terms of numbers, they are actually smaller in terms of value now. This is the case both for civil engineering, which reflects the caution of private investors, and for civil engineering, which is mainly directed by the public sector,” said Petr Dufek, chief economist at Bank Creditas.
“We are witnessing a lower number of building permits issued and housing construction starts. A number of projects are being delayed, with developers and private investors worried mainly about high inflation and expensive loans. It is the problems with financing that are holding the market back the most, and some builders prefer to postpone the start of construction and wait for better interest rates,” said Peter Markovič, CEO of Xella, a manufacturer of building materials for the Czech Republic and Slovakia.
Štěpán Křeček, chief economist at BH Securities, also points to the problem of expensive loans. This leads to low demand for buying real estate. Prices are falling on the property market, yet property prices are very high relative to the incomes of Czech households. We are thus getting into a situation where ownership housing is hardly affordable even for the middle class,” he pointed out.
“The prospects for the future based on the issued building permits are not particularly encouraging yet either. Their number fell by 13.3 per cent year-on-year in March. As for the indicative value of building permits, it was 6.3 per cent lower compared to March last year. The problem is mainly a drop in interest in new construction,” said Jan Vejmělek, an analyst at Komerční banka.
Vejmělek expects a gradual improvement of the situation during the year, especially in the area of infrastructure investments financed from public money. In his opinion, construction output could grow by one percent over the whole year. On the contrary, according to Markovič, the construction sector will decline by several percent this year, mainly due to weak housing construction, where he expects a double-digit drop.
Source: ČSÚ and CTK
