Construction output has returned to the level of 2019. The year-on-year increase is mainly due to the success of the civil and engineering construction sector. However, a negative phenomenon is the lower number of issued building permits, so a major recovery of the industry cannot be expected in the future, analysts and experts contacted agreed.
According to data from the Czech Statistical Office (ČSÚ), construction production in the Czech Republic grew by one percent in June in year-on-year comparison after four months of decline. On a month-on-month basis, construction output was 2.5 percent higher. Output in civil engineering increased by 0.7 per cent and civil engineering rose by 1.6 per cent year-on-year.
“In civil engineering construction, which lives mainly on public contracts, construction output was 6.5 per cent higher compared to the average month of the last pre-census year. In civil engineering, which is dedicated to the construction of houses and commercial properties, it is still below this level,” said Petr Dufek, chief economist at Bank Creditas.
He said that given the reduced plans of developers, the lower results of this part of the sector are not such a surprise. “Rising koruna and especially euro interest rates are hitting the profitability of new projects, so they urge greater caution,” he added.
According to Martin Gürtler, an analyst at Komerční banka, the decline in building permits issued points to a not very optimistic future development of construction output. An improvement cannot be expected until the interest rate on mortgage loans is lowered. According to the ČSÚ, building authorities issued 8.7 percent fewer permits year-on-year and their indicative value fell by 15.2 percent.
“In our view, there will be no major change in this respect before the end of the year, as we expect the Czech National Bank’s interest rates to remain stable at current levels. Next year, the central bank should already start cutting interest rates. However, the spillover effect into higher construction is likely to take some time,” Gürtler said. He added that many developers have cut back on construction due to the current low demand and the state is not investing either.
According to Kristýna Victor, head of real estate at Broker Consulting, the currently discussed draft decree on technical requirements for construction could have an impact on the future development of the construction industry. It should simplify the issuance of building permits, which is part of the reason for the reduction in the number of issued building permits.
“The more complicated and binding the adopted standards become, the worse conditions will be created for new domestic residential construction. This will simply not help its further development. A more effective way is to create conditions for speeding up planning and shortening the preparation of new projects. Another way to help the development of construction production is closer cooperation between investors and local authorities,” she said.
Source: ČSÚ and CTK
