Romania Construction & Real Estate Report - Q1, 2014

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Romania Construction & Real Estate Report - Q1, 2014

The construction works index contracted by 1.5% year on year in Q4/2013, after the unexpected robust 8.5% year on year expansion in Q3. In full-year 2013, the index edged down 0.6% year on year, driven downwards by the poor performance in the construction of new non-residential buildings. The construction sector thus returned in the negative area after two years of slight recovery in 2011-2012.

The construction works index in 2013 was by 24% below the pre-crisis peak level reached in 2008, but however it hovered 3.6% above the lowest level reached during the recession period, in 2010.

The activity in the construction sector seems to have stabilized on low level, despite the slight annual decline recorded in 2013. The infrastructure projects, however, maintained sluggish pace in 2013 and prospects for 2014 are rather uncertain. Despite the authorities’ declarative efforts, many large scale projects are delayed or stalled, few new projects are launched, while undergoing ones are facing financing difficulties.

The real estate market, on the other hand, was more dynamic in terms of transactions and new supply. The number of real estate transactions advanced by 16.9% year on year in 2013, according to our calculations based on official statistics. Approximately 114,500sqm of new modern retail stock were added to the market last year and prospects are encouraging for 2014 as well, considering that in February alone there were seven retail projects under construction only in Bucharest.

The residential real estate prices inched up by 0.8% year on year in Q3/2013, which is the first annual increase in the past three years. Nonetheless, in Jan-Sep 2013 prices remained by 0.4% year on year lower. The slight annual increase of residential prices is mostly explained by low base comparison and indicates a stabilization of the market and a rising interest of buyers particularly in H2/2013, encouraged by low prices.

Table of Contents

Executive summary 4
Market overview 5
Construction works index drops 1.5% y/y in Q4/2013, bringing down full year annual performance 5
Construction output y/y performance is below EU28 average in Q4/2013 7
Investments in national economy drop y/y in 2013, construction sector’s stake decreases 5.8pps 7
Number of residential building permits slows down annual decrease in 2013 7
Number of finished dwellings continues on negative y/y path in Q4/2013 8
Value added by construction forecasted to rise 6.1% y/y in 2014, after 1.2% y/y decline in 2013 9
Infrastructure 10
EC expects Romania’s transport sector masterplan in 2014 10
Infrastructure investments are at critical level, transport ministry advisory firm says 10
Romania attracts EUR 923mn EU funds under operational transport programme in 2013 11
Roads authority CNADNR plans to complete 93.1km of highways in 2014 11
Transport ministry plans to build EUR 1.5bn Bragadiru-Voluntari metro section under PPP or concession 11
Transport ministry to cancel contract with Italian firm Impreglio for Orastie-Sibiu motorway section 11
Real estate 12
Number of real estate transactions rises 16.9% y/y in 2013 12
Investments in commercial real estate projects surge to EUR 343mn in 2013 12
Residential real estate prices inch up y/y in Q3/2013, first annual increase in three years 13
Government to amend subsidized home loan scheme 14
New retail stock supply reaches 114,500sqm in 2013 14
Erste, Raiffeisen and Pfandriefbank extend EUR 220mn loan for AFI Palace Cotroceni shopping mall 15
Statistical appendix 15

Table 1 Construction sector performance in 2007-2013 (y/y, annual) 6
Table 2 Construction works index in 2011-2013- Quarterly performance by structure (y/y) 6
Table 3 Construction works index in 2011-2013 - Quarterly performance by destination (y/y) 6
Table 4 Construction output in 2013-2014 - Romania, EU28 (y/y, in %) 7
Table 5 Licenses for residential buildings issued in 2007-2013 (number, y/y) 8
Table 6 Completed dwellings by type of financing in 2007-2013 (annual, y/y) 9
Table 7 Completed dwellings by type of financing in 2011-2013 (number, y/y, quarterly) 9
Table 8 GDP and Construction output in 2012-2017f (y/y) 9
Table 9 Major real estate acquisitions in Romania in 2013 (USD mn) 13
Table 10 Residential property price indices in 2011-2013 (quarterly, y/y) 14
Table 11 Major modern retail projects completed in 2013 14
Table 12 Value of construction works performed in 2007-2012, by type (RON mn, annual) 15

Figure 1 Construction works index in 2005-2014 (monthly, y/y) 5
Figure 2 Construction works index, rolling 12M in 2005-2013 (2010=100) 5
Figure 3 Value of construction works by type in 2012 (% in total, RON mn) 6
Figure 4 Construction works index in 2005-2013 (monthly, 2010=100) 6
Figure 5 Investments in national economy by sector in 2011-2013 (% in total) 7
Figure 6 Building permits by type of building, issued in 2013 (% of total) 7
Figure 7 Licenses for residential buildings issued in 2007-2013 (number, monthly) 8
Figure 8 Building permits by type of building issued in 2009-2013 (number, y/y, annual) 8
Figure 9 Construction gross output in 2003-2017f (bn 1995 USD, y/y) 10
Figure 10 Number of real estate transactions in 2012-2013 (monthly, thou) 12
Figure 11 Value of transport infrastructure works performed in 2007-2012 by type (RON mn, annual) 16

Number of pages: 16
Release Date: Thu, 03 Apr 2014