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Romania Constructions and Real Estate Report - Q1, 2015

Romania Constructions and Real Estate Report - Q1, 2015

This report covers the market developments in Q4/2014, FY 2014 and the data available as of March 2015.

In 2014, Romania’s construction market hit the lowest level since its peak in 2007, head of the constructions’ association ARACO, Laurentiu Plosceanu, estimates.The market contracted by 4% y/y to €8.9bn. Infrastructure works have severely contracted on subdued public capital expenditures while residential segment surprisingly gained ground – heralding what is expected to become stronger recovery this year. Infrastructure works depend on the public investments, which are still uncertain despite government’s promises. Major fiscal reforms planned as of June (VAT cut) and January 2016 (New Fiscal Code) create better environment for investors, but put at risk government’s capacity to finance such investments on medium term.

The construction works volume plunged by 6.7% y/y in 2014, steepening from the 0.6% y/y decline in 2013. The civil engineering segment, which accounts for the largest share of the construction market, plunged by 21.8% y/y during the year, driving downwards the performance of the entire sector. Residential constructions surged by 32.6% y/y, while non-residential constructions increased by 16.6% y/y in 2014.

In Q4/2014, the construction works index inched up by 2% y/y, after having declined at double-digit y/y pace in all the previous three quarters. The civil engineering segment however continued to contract significantly over the quarter. The buildings segment performed better in Q4, yet throughout the year both the residential and non-residential sub-segments recorded fluctuating performance.

The real estate market maintained its dynamics in Q4, when the value of transactions reached €514mn, according to market estimates. The total investments volume last year totalled €1.3bn and considering the number of properties under negotiations on all segments of the market, the same cheering performance is expected this year as well.
The subdued activity in constructions in 2014 creates a low base for this year’s performance, yet the recovery (and potential growth resumption) of the sector remains linked to the authorities’ decision to revive public investments in infrastructure and the improving absorption of EU funds.

Key points:

Construction works index up marginally y/y in Q4, full year performance remains negative
Number of residential permits drops 0.5% y/y in Q4/2014
Value of real estate transactions reaches €514mn in Q4/2014 - study
Modern retail space deliveries to reach 166,000sqm in 2015-2016
GTC sells commercial centre in Buzau to Eurosting group


Executive summary 4
Market overview 5
Construction works index up marginally y/y in Q4, full year performance remains negative y/y 5
Construction market hits lowest post-crisis level in 2014 –construction association 5
Romania’s construction output above EU average in Q4/2014 7
Investments in national economy decline y/y in 2014, construction’s stake rises 7
Number of residential permits drops 0.5% y/y in Q4/2014 8
Number of finished dwellings down y/y in Q4/2014, after third consecutive quarters of increase 9
Value added by construction forecasted to resume growth in 2015 9
Building materials market value stagnant y/y in 2014, expected to grow in 2015 10
Infrastructure 10
Public roads company CNADNR awards €177mn motorway construction contracts in Jan-Mar 2015 ... 11
… and another €90mn contract on April 1. 11
CNADNR expects around 90km of highways to be completed this year 11
CNADNR awards RON1.2bn contracts for construction of Campia Turzii-Ogra-Targu Mures motorway 11
CNADNR plans to increase headcount, budgets higher investments this year 12
Real estate 12
Number of real estate transactions down marginally y/y in 2014 12
Residential prices drop for third consecutive quarter in Q3/2014 13
Value of real estate transactions reaches €514mn in Q4/2014-study 14
Modern retail space deliveries to reach 166,000sqm in 2015-2016 14
GTC sells commercial centre in Buzau to Eurosting group 14

Table 1 Construction sector performance in 2007-2015 (y/y) 6
Table 2 Construction works index in 2012-2014- Quarterly performance by structure (y/y) 6
Table 3 Construction works index in 2012-2014 - Quarterly performance by destination (y/y) 7
Table 4 Value of construction works by type in 2007-2013 (RON mn) 7
Table 5 Construction output in 2014-2015 - Romania, EU28 (y/y, in %) 7
Table 6 Licenses for residential buildings issued quarterly in 2012-2014 (quarterly, number, y/y) 8
Table 7 Licenses for residential buildings issued in 2007-2014 (number, y/y) 9
Table 8 Completed dwellings per type of financing in 2007-2014 (annual, y/y) 9
Table 9 GDP and Construction output in 2013-2018f (y/y) 10
Table 10 Residential property price indices in 2010-2014 (2009=100) 13

Figure 1 Construction works index in 2005-2015 (monthly, y/y) 5
Figure 2 Construnction works index, rolling 12M in 2005-2014 (2010=100) 5
Figure 3 Construction works index in 2005-2015 (monthly, 2010=100) 6
Figure 4 Investments in national economy by sector in 2013-2014 (% in total) 8
Figure 5 Licenses for residential buildings issued in 2007-2014 (number, monthly) 8
Figure 6 Dwelling stock in 2007-2013 (number, eop) 9
Figure 7 Construction gross output in 2003-2017f (bn 1995 $, y/y) 10
Figure 8 Number of real estate transactions in 2012-2014

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