Romanian Construction Mkt To See Record Growth Until 2010 – Report

According to the Romanian Construction Employers and the Romanian Association of Construction Entrepreneurs, the domestic market stood at some EUR10 billion last year and is expected to see a 20% to 35% hike this year.

According to the PMR report, in the commercial property sector, developers and investors have started to consider other locations after many years of domination by the capital city of Bucharest.

The relative saturation of the market in Bucharest and rising land prices are making investment less effective than in other locations. For the moment, locations like Cluj-Napoca, Timisoara or Constanta are being considered due to much lower land prices and superior purchasing power in the case of commercial space or their location advantages for modern industrial space (located closest to Western Europe or on the Black Sea shore), PRM said.

The report adds that Bucharest is still the undisputed leader in office space, both in terms of existing stock and announced projects and a relatively limited number of announced projects are holding demand much higher than the supply. However, it is expected to reach a balance in three-four years.

Analysts also say Romania will earmark considerable funding for transport infrastructure and environmental projects.

The total value of transport infrastructure projects will amount to EUR5.7billion in the 2007-2013 interval, of which EUR4.6 billion is European funding. Also, Romania will use EUR5.6 billion for environmental infrastructure works, of which EUR4.5 billion will be EU funding.

"The Romanian Government has set very ambitious goals for motorway construction, planning to complete over 1,800 kilometers of motorway with investments amounting EUR13 billion, until 2013,” the report notes.

Airport construction is set for large investment as well, as stated in the EU funding program. Romania has witnessed spectacular growth rates in the number of air passengers over the past few years, including a 40% growth rate in 2007, the report added.

In the environmental sector most of the funds will be spent on water, used water management, and waste management.

“Civil engineering construction is about to experience a period of strong increases. We expect this segment to grow faster than the market and it will increase its share in total construction and assembly output starting from 2009”, said Ovidiu Oancia, co-author of the report.

In the residential sector, PRM considers dwellings in Romania differ greatly from those in most EU countries in terms of surface and quality and many need renovation. The country also has a housing shortage in Romania estimated at around one million, the report noted.

"By 2010 around 50,000 dwellings will be completed each year," the report stated.

The report stated that due to the improving standard of living among the population, the housing loans market is expanding and more and more Romanians can afford to apply for mortgage loans, which has kept developers busy and has also raised house prices.

However, there is still a series of factors that can negatively influence the construction market in Romania, most notably the lack of construction workers due to work emigration and the capacity of Romanian construction companies to take up large construction projects, the report concluded.