Industry Trends and Recent Happenings:
- The Czech Republic’s construction industry continued its weak performance in 2012; construction output declined while new orders contracted, and the number of building permits fell in 2012, compared to the levels recorded in 2011. The value of the construction industry declined in 2012, compared to the level in 2008.
- The industry is expected to decline further due to low confidence among private investors and the restricted potential of the federal budget, as the government imposed specific austerity measures to control rising public debt.
- The Czech Republic’s export-oriented economy faces the volatility in the eurozone and is expected to struggle in 2013. The impact of the ongoing eurozone sovereign debt crisis on business confidence is the main hindrance to activity in the construction industry.
- The government introduced a bill to be effective from 2013, which calls for compliance with energy performance requirements according to Act No. 406/2000 Coll. for developers seeking a new building permit. The regulation is expected to become more stringent from 2020, with only those buildings adhering to the energy requirement of near-zero receiving permits. However, religious buildings, industrial buildings, cultural buildings, agricultural buildings and holiday homes, with yearly energy consumptions of less than 700 gigajoules, are excluded from having to adhere to the requirements. The regulation is expected to drive the growth of sustainable residential and commercial buildings, while the procedural compliance for new permits will increase, delaying the execution of new building construction projects.
- The EU granted a fund support of CZK800 billion to the Czech Republic for various construction projects during 2007–2013. However, serious instances of mismanagement in the country’s construction industry led to a halt on EU funds in 2012.
- There has been an increase in the number of smaller households in the Czech Republic, owing to an increase in the number of people living without partners, an increase in the number of senior citizens, single-parent households, and a decline in the number of marriages. The number of single-person households grew by over 15% in the 1990s and is estimated to have increased by 10-20% per annum between 2001 and 2011. The rise in the number of smaller households is expected to increase demand for housing.
- Fewer large public infrastructure projects will be implemented until 2014 as the government focuses on tackling the budget deficit. Competition for projects is therefore fierce, and margins have reportedly declined significantly.
- Value add by construction in the Czech Republic totaled CZK221.4 billion (US$11.3 billion) in 2012, d. The decline in construction value add, as a result of the economic crisis, has intensified competition in the industry and put pressure on contractors’ margins. Margins are expected to grow slowly over the forecast period
- The proportion of senior citizens, those aged above 60 years, in the Czech Republic reached 22% in 2012. This figure is expected to grow rapidly over the forecast period. The steady increase in the aging population drives the need for an increase in budgetary allocation to healthcare. This is expected to spur the expansion of healthcare buildings over the forecast period.