Czech Republic’s Construction Industry Expected to Decline Further

Czech-Republics-Construction-Industry

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.

 

About Varun Seepathi 40 Articles
With an experience of over 3 years, Varun Seepathi has aided more than 50 medium to small and large firms for foraying into new markets, by increasing footprint in the existing bracket and understanding the ins and outs of these beasts. These beasts are the companies which have been exclusively engaged in materials, chemicals or packaging activities, and have encountered restraints either in the maintenance of P&L or in beating their competitors. He has also authored more than 300 research papers relating to the industry which consist of crucial information such as addressable serviceable market, strategies of players, growth of the market, market size, forecast, market share estimations and winning strategies along with opinions on the same. The “three slope distributor/off-taker evaluation model” currently in use by a lot of multinational companies has also been pioneered by him. A mood driven writer, a professional consultant, and a born explorer, Varun Seepathi is currently working as a full-time consultant. Healthcare, wealth management and information technology are some of the verticals of the industry where he has demonstrated his skills.