Complicated financing and slow building permitting is one of the factors behind the February drop in construction production in the Czech Republic, according to analysts. According to data from the Czech Statistical Office, it deteriorated by 4.3 percent year-on-year in February and experts contacted by the Czech News Agency reiterated that the outlook is unfavourable due to the poor development of the domestic economy.
Petr Dufek, chief economist at Bank Creditas, said that February’s construction sector results were not pleasing, but on the other hand, the beginning of the year is less significant in terms of production volume, while being strongly dependent on the weather. “The market is mostly hampered by problems with financing, some builders prefer to postpone the start of construction and wait for better interest rates, which will probably not come before the second half of the year,” said Peter Markovič, CEO of Xell (Ytong manufacturer) for the Czech Republic and Slovakia.
The civil engineering sector deteriorated by 1.5 percent year-on-year and the civil engineering sector by 14.4 percent. “I think that even considering how the budget of the State Fund for Transport Infrastructure is filled, this is an unsystematic fluctuation in the field of civil engineering, especially transport infrastructure. Moreover, the bases of last February and this January were high. We’ll see what the construction output numbers will be in the spring months,” said Jiri Nouza, president of the Construction Entrepreneurs Association.
Experts agreed that the problem is slow permitting, which has long limited construction in the country. In February, construction started on roughly five percent fewer apartments than last year and building authorities issued 6,006 building permits this February, down 13 percent year-on-year.
The construction industry is therefore looking ahead to an amendment to the Building Act, which has already been approved by the lower house of parliament and should come into force next year. “It has taken almost six years of efforts to make changes, so we welcome the shift and believe that not only the new law will soon be finalized, but that its implementing regulations will be in a similarly progressive spirit,” said Michaela Tomášková, executive director of developer Central Group.
Improvements in zoning will also be important, and Kristýna Viktora, head of Broker Consulting’s real estate department, added that digitisation of the entire project preparation process is also needed to improve the situation. However, she said the current situation will definitely not turn around overnight. Therefore, we will probably have to wait for significantly better data on construction production, Viktora added.
According to BHS chief economist Štěpán Křeček, the decline in construction output this year will persist in the coming months. Creditas’ Dufek said that the high price of construction materials and the lack of skilled and auxiliary workers remain limiting factors. “The potential for growth, on the other hand, is expanded by the money from the reconstruction fund and other EU sources. It will be a question of how actionable the Czech Republic can be in preparing projects and then drawing on this money,” Dufek said.
Source: CTK
