Domestic construction market is heading to crisis, KeysFin study warns

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The construction market in Romania is moving quickly toward a crisis similar to that in 2011-2013, if the banks will continue to limit Romanians’ access to credit, KeysFin study shows.

“Overall, the effects will be felt in the economy as the construction sector involves a significant number of related businesses. 3,146 companies operating in the construction industry were declared inactive in the first six months of 2016, with 996 more than the same period of the previous year,” KeysFin analysts note.

The number of companies operating in the industry declined by over 3,800 companies, from 35,208 in 2015, to 31,334 at end-June 2016. By comparison, there were 33,857 construction companies registered in 2010.

The data are relevant to the construction sector situation, especially in the residential sector, where the majority of sites have been mothballed amid the freeze on financing. The Debt Discharge law and the difficulties in First House programme made the banks to review their lending policies and the results were seen in the lower level of new housing contracts.

According to KeysFin data, the number of building permits has also decreased significantly compared to the previous years. If in 2014, there were registered 26,038 permits in July, in 2015, 26,393 permits have been reported, while this year, their number decreased by 728 to 25,665 authorizations.

According to the study, Strabag, Bog’Art and Astaldi occupy the first three positions in the top 10 construction companies in Romania.

The turnovers of the first 10 players in the construction market reached last year RON 3.8 billion.

“The financial data show that the construction sector in Romania is full of challenges. The fluctuating state investments, doubled by the uncertainty on lending of the real estate market in recent years, lead to an unstable business environment in which the certainty is an unknown word and the multiannual programming is still in the aspirational stage. Unfortunately, we have an economic growth mainly based on consumption and less on developing products, projects, medium and long term actions. In the absence of higher value investment with horizontal development, involving related business, this growth is likely to melt like a snowball. Thus, the constructions remain the most important indicator regarding Romania’s evolution on healthy basis, and this is still fluctuating, without real positive prospects,” the analysts concluded.

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