Construction will ease the decline this year, the problem is the lack of built apartments

Prague - Construction output will further mitigate its decline this year, analysts contacted by ČTK expect. According to them, the problem remains weak residential construction, which contributes to the rising prices of new housing. Construction output in the Czech Republic slowed its year-on-year decline to 3.1 percent in March. In February, it decreased by 11 percent, marking the most significant year-on-year drop since July 2016.

Poor results are primarily reported in civil engineering, which fell by 5.7 percent year-on-year, noted BHS analyst Štěpán Křeček. In contrast, production in engineering construction rose by 6.5 percent year-on-year. This year, the weather is significantly worse than last year, which is hindering outdoor work, he stated. However, according to him, many companies started the construction season in March nonetheless.

No turnaround is visible in residential construction, where the number of newly built apartments continues to decline, added ČSOB analyst Petr Dufek. This, according to him, is not good news for the strained real estate market, where apartment prices reach new highs every quarter. Property prices are rising significantly faster than rental prices, Křeček added. Thus, the motivation to rent is decreasing in the market, and many investors, according to him, are beginning to focus solely on purchases and subsequent sales of properties for profit.

The construction sector as a whole still faces a shortage of suitable labor, especially agency workers from Ukraine and the Balkans, stated Trinity Bank analyst Lukáš Kovanda. They left last year in connection with the outbreak of the pandemic and have not yet returned.

"We believe that Czech construction, affected by the pandemic only to a certain extent, will not significantly decline this year; rather, we expect stagnation or mild growth," said Peter Markovič, managing director of Xella CZ, the largest producer of aerated concrete in the Czech Republic, to ČTK.

According to him, demand for building materials has not significantly waned even during the pandemic. People want to build and renovate, and cheap and accessible loans support this. "In the currently published results, however, we continue to record a decline in the number of started constructions in the Czech Republic. This will sooner or later manifest in demand for building materials," he noted.

According to Vejmělka, recovery in the sector will be slow and will continue to be driven rather by public investments and the engineering segment. "Only in the second half of the year, in connection with the revival of private investments, do we expect more robust construction activity. The number and volume of building permits issued in March is a promise," he added.