FORECAST REPORT ROMANIA UNTIL 2016 This Forecast Report was written by EBUILD srl, Romanian member institute of EECFA Mr Sebastian Sipos-Gug T: + 40 359 466 330 [email protected] www.ebuild.ro Editor: EECFA Analytical approach and methodological background: Dr Aron Horvath – EECFA Research – ELTINGA Janos Gaspar – EECFA Research www.eltinga.hu www.eecfa.com Copyright shall be held by EECFA, Winter 2014 ROMANIA © 2014 EECFA 02 04 _ Summary 05 _ Summary: Forecast revision 06 _ Forcast table 1 | macro figures 07 _ Forcast table 2 | construction summary figures 08 _ Residential construction | graph 09 _ Residential model | graph 10 _ Residential construction | graph, text 13 _ Forcast table 3 | residential figures 14 _ Office construction | graph 15 _ Office construction | graph, text 18 _ Retail and wholesale construction | graph 19 _ Retail and wholesale construction | graph, text 22 _ Industrial and warehousing | graph 23 _ Industrial and warehousing | graph, text CONTENT 25 _ Hotel construction | graph 26 _ Hotel construction | graph, text 28 _ Education- and Health-related construction | graph 29 _ Education- and Health-related construction | graph, text 31 _ Other non-residential | graph, text 32 _ Forecast table 4 | non-residential figures 33 _ Road construction | graph, text 36 _ Railway construction | graph, text 38 _ Other transport infrastructure | graph, text 40 _ Energy, pipeline, cable construction | graph, text 42 _ Public utility | graph, text 44 _ Forecast table 5 | civil engineering figures 45 _ Project data | table ROMANIA © 2014 EECFA 03 Summary 30% of total construction 25% of total construction 45% of total construction Renovation ratio* 14% Renovation ratio 17% Renovation ratio 30% (2013) (2013) (2013) Residental (at constant price) Non-Residental (at constant price) Civil engineering (at constant price) 2000 2016 2000 2016 2000 2016 *Renovation / Total Macro outlook until 2016 Population (20-29 age group) GDP Private consumption Industrial production Employment Income Finanacial conditions GREEN: POSITIVE GREY: NEUTRAL RED: NEGATIVE Residential construction has been the major driver for of non-residential construction; nevertheless, ware- construction sector growth in 2014. Increased income, housing is still underperforming mainly due to the lack SUMMARY lower loan rates and continued government support of modern transportation infrastructure. However, it had a positive impact on the Romanian residential mar- might see a surge in the future if the situation improves. ket. This effect was further amplified by the resurgence of large scale speculative residential projects in 2014, Civil engineering has experienced shrinkage in 2014; and their number is to rise 2015 and 2016. However, though we expect the situation to improve in 2015 and residential transaction prices remain low and most beyond. Road construction continues to remain the ith a GDP evolution of +3.5% in 2013, Romania wit- transactions are for smaller homes, which can easily most influential section, covering one third of all civil Wnessed the second biggest growth rate in the EU., be mortgaged with government support and thus major engineering output. Although road construction was The performance for the year 2014 is also set to be growth, comparable to 2008, is not expected. expected to grow in 2014 and further drive the con- around 2%, with positive forecasts for 2015 and 2016 as struction market upwards, several factors prevented well (Source: Eurostat). Private consumption and real For 2015 and 2016, we expect non-residential construc- this from happening, including the cancellation and wages are also foreseen to undergo growth in 2015 and tion to continue to expand on all sections, with office delay of several key projects, lawsuits, budget cuts for beyond, with a positive impact on the investment and and industrial construction being the largest contrib- investments and a negative effect of the election pro- construction activities throughout the economy, while utors to this growth. Retail developments are still cess. The sector is prone to major growth in the future, the stable inflation rate should ensure growth to take limited, but might increase in the future as economic should these problems be at least partly addressed, place. The demographic evolution is having an overall growth will translate to purchasing power., Further- as all the major infrastructure sections (road, railroad, negative impact on the construction sector, with an more, infrastructure will improve since Romania has waterways, airports, public utilities) are underdevel- aging population, although this effect is still modest. Due a lower than average density of commercial space. oped or in need of repair. Many projects are ongoing or to the positive economic perspective, Romania will have Office and industry benefit from lower wages and high are about to be launched and funding could be achieved a growing market for investments into construction. accessibility to qualified personnel in the Romanian uni- with the help of European Union co-funding. versity centers and continue to be the biggest sections ROMANIA SUMMARY © 2014 EECFA 04 Summary: Forecast revision Current forecast Previous forecast Residental (at constant price) Non-Residental (at constant price) Civil engineering (at constant price) 2000 2016 2000 2016 2000 2016 n case of residential construction, our forecast has Our industrial, storage, hotel, education and health Islightly been adjusted in light of new data. The largest construction forecasts remain unchanged. SUMMARY: change was related to multi-unit construction where our forecast has been adjusted upwards due to the Civil engineering saw the largest revisions. In light of evolution of building permits and ongoing/planned the low performance in the first quarters of 2014 we FORECAST projects. have altered our forecast for 2014 from positive to negative, with continuing growth to be expected in 2015 Non-residential construction also saw some and 2016. The sectors most affected by this change REVISION adjustments. In case of office construction, in light of are road and railroad constructions. Due to various market developments, namely higher than expected political and legal issues, as well as the impact of the completion rates, we have updated our short-term election year, these sectors have underperformed forecast for 2014 upwards, however, the 2015 and (more information on the assumed causes can be 2016 forecast continues to be that of a small positive found in each corresponding chapter). Energy-related growth. For the retail sector, market contraction in construction has also been adjusted downwards; as 2013 and 2014 was more evenly distributed among several projects have been postponed or cancelled. the two years. By 2015 both forecasts converge on Nonetheless, in the long term we expect growth to the same expected output and we continue to foresee continue in this sector. a small negative evolution of this construction type. ROMANIA Summary: forecast REVision © 2014 EECFA 05 Forcast table 1 | macro figures FORECAST TABLE 1 ROMANIA MACRO CONDITIONS AND DEVELOPMENTS 2006 2007 2008 2009 2010 2011 2012 2013 2014(F) 2015(F) 2016(F) POPULATION (´000) 21 257 21 131 20 635 20 440 20 295 20 199 20 096 20 020 19 959 19 909 19 869 POPULATION AGE GROUP 20-29 YEAR (´000) 3 104 3 061 2 877 2 813 2 774 2 720 2 653 2 618 2 594 2 557 2 508 GDP GROWTH (%) 7.9 6.3 7.3 -6.6 -1.1 2.2 0.7 3.5 2.0 2.4 2.8 PRIVATE CONSUMPTION GROWTH (%) 12.9 12.0 9.0 -10.4 -0.2 1.1 1.1 0.9 3.8 2.3 2.4 RETAIL TURNOVER (%) 23.1 20.6 18.2 -9.3 -7.3 -1.2 4.2 1.0 6.0 3.0 3.0 INDUSTRIAL PRODUCTION (%) 9.9 10.1 2.7 -5.3 5.1 7.7 2.8 7.1 5.5 3.0 3.5 EMPLOYMENT (´000) 9 313 9 353 9 369 9 243 9 239 9 138 9 263 9 247 9 290 9 355 9 428 REAL WAGE GROWTH (%) 9.0 14.7 16.5 -1.5 -3.7 -1.9 1.0 0.8 2.8 1.3 0.7 CONSUMER PRICE INDEX (%) 6.6 4.8 7.9 5.6 6.6 5.8 3.3 4.0 2.2 3.1 3.0 INTEREST RATE ON NEW HOUSING LOANS (% P.A.) 10.0 9.7 11.0 12.6 11.7 9.5 8.0 7.5 5.9 6.3 6.0 1 EUR IN RON 3.5 3.3 3.7 4.2 4.2 4.2 4.5 4.4 4.5 4.4 4.4 ROMANIA FORECAST TABLE 1 © 2014 EECFA 06 Forcast table 2 | construction summary figures FORECAST TABLE 2 VALUE VALUE GROWTH RATES AT CONSTANT PRICE (%) ROMANIA (RON MLN) (EUR MLN) CONSTRUCTION MARKET SIZE 2013 2013 2006 2007 2008 2009 2010 2011 2012 2013 2014(F) 2015(F) 2016(F) AND DEVELOPMENT NEW 18 993 4 297 - - - -26.2 -14.3 -21.3 11.0 -7.0 6.6 5.0 1.1 RESIDENTIAL RENOVATION 3 092 700 - - - -4.7 -16.2 5.4 -1.2 28.0 2.2 4.1 0.2 TOTAL 22 085 4 997 47.8 50.9 11.2 -24.6 -14.4 -18.9 9.6 -3.3 6.0 4.9 1.0 NEW 14 953 3 383 - - - -17.9 -13.6 14.0 -22.4 6.9 6.6 2.5 2.1 NON-RESIDENTIAL RENOVATION 3 063 693 - - - -11.9 -31.2 16.9 -11.0 14.6 2.8 4.8 3.6 TOTAL 18 016 4 076 21.3 18.1 33.0 -17.0 -16.6 14.4 -20.7 8.1 6.0 2.9 2.4 NEW 33 946 7 680 - - - -23.1 -14.0 -7.1 -5.5 -1.4 6.6 3.9 1.6 BUILDING RENOVATION 6 155 1 392 - - - -8.9 -24.8 11.5 -6.6 21.0 2.5 4.5 1.9 CONSTRUCTION TOTAL 40 101 9 073 35.5 37.2 19.0 -21.6 -15.4 -5.0 -5.6 1.5 6.0 4.0 1.6 NEW 23 236 5 257 - - - -5.5 -2.1 -1.1 -9.6 3.0 -8.9 9.3 6.1 CIVIL ENGINEERING RENOVATION 9 723 2 200 - - - -11.1 -11.5 2.6 4.2 4.6 -2.2 4.3 1.1 TOTAL 32 959 7 457 24.1 26.8 27.0 -7.1 -4.7 -0.2 -6.0 3.5 -6.9 7.7 4.6 TOTAL CONSTRUCTION OUTPUT 73 060 16 529 31.1 33.4 21.8 -16.3 -11.0 -2.9 -5.8 2.4 0.2 5.6 2.9 ROMANIA FORECAST TABLE 2 © 2014 EECFA 07 Residential construction | graph 55% of building construction RESIDENTAL CONSTRUCTION is residential (2013) RON 35bln RON 35bln ) e c i r p RON 30bln 3 n RON 30bln 1 io 0 at 2 m t ti a s ( e t d u n p e t tr Forecast u RON 25bln o rm RON 25bln l e a -t ti g n n e o id L 22.1 s e (RON bln) R RON 20bln RON 20bln 5.0 (EUR bln) RON 15bln RON 15bln RON 10bln RON 10bln RON 5bln RON 5bln RON 0bln RON 0bln 24% 47% 116% 9% 12% 48% 51% 11% -25% -14% -19% 10% -3% 6% 5% 1% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 ROMANIA Residental Construction © 2014 EECFA 08 Residential model | graph RON 40bln RON 40bln RESIDENTIAL IN THE LONGER RUN WE THINK THAT OUTPUT TENDS TO DIRECT TOWARDS ITS LONG-TERM TREND (THE GRAPH ON THE BOTTOM RIGHT CORNER), DEFINED BY INCOME AND DEMOGRAPHIC TRENDS.