Czech Republic construction output turnaround

The Czech Republic’s construction sector recorded output growth of 3.5% to over CZK400 billion (€15 billion) in 2014, following five years of consecutive results declines, according to research company PMR.

It said the improved picture was attributable to a recovery in the civil engineering sector. It said that modest growth was likely to continue further this year, and into 2016.

According to PMR, another key segment is the transport infrastructure segment. This includes government plans for over 200 projects worth a total of CZK230 billion (€8.4 billion) by the end of 2016.

PMR said that the slower pace of recovery seen in the construction sector had been because of an insufficient number of orders being placed in the public sector, and a lower appetite for investment by private developers.

The Czech construction output results for 2014 were around 25% lower than when the recession began in 2008.

Despite, this, PMR said that business confidence in the construction sector had improved gradually in 2014. In 2015, it has improved further, reaching a record six-year high in January.

The PMR research said that in 2014, a number of transport infrastructure construction orders had been tendered. It said that the 7.4% year-on-year increase in civil engineering works had been achieved through an increase in budgets, and improved strategies adopted by the government over the past two years.

In its outlook, PMR expected a growth rate of construction output of 6 to 7% in 2015 to 2016. But it added caution over the non-residential construction sector, which has seen a reduced level of building permits approved. Last year, the number of permits dropped to 6,180, which was the lowest amount for a decade.

The value of non-residential construction projects which received building permits was also said to have reached record low levels. Permits for buildings worth CZK37 billion (€1.4 billion) were issued last year, which represented a 7% year-on-year fall.

Within the residential sector, there was also a fall in the number of building permits for a third year in a row. Despite this, following six years of decline, the number of properties actually started last year rose by 10%, as investment started to return to this sector.

PMR said that developers expected the average price of a new flat to rise further in 2015, driven mainly by the record low mortgage interest rates and the growing economy. It said there was a growing demand for small flats on the Prague residential market.