Permits for new residential buildings jump by 28.7% y/y in Romania

The number of permits for construction of new residential buildings increased robustly by 28.7% y/y to 2,009 in January, according to data released by the state institute of statistics. That was the strongest rise of the indicator since August 2015 and was most probably fuelled by new residential projects announced by some big private investors and by the start of new residential works financed by public investments using EU funds. The new residential permits increased in both rural and urban segments, but the rural reported the highest rise and accounted for about two thirds in total. On the negative side, the number of permits for new residential buildings kept on falling sharply in monthly terms in January, which means that the improvement is not consolidating.

At the same time, the number of permits for administrative buildings construction almost tripled y/y in January, following another strong jump in December last year. The dynamics was fuelled by a boost in the number of requested permits for administrative buildings in urban areas, likely backed by start of projects for new office buildings. We note again though that the dynamics of permits for new administrative buildings has been generally moving sideways, as it heavily relies on public spending. As for the other buildings, which include hotels, retail buildings, buildings for transport and telecommunications, industrial and agricultural buildings, schools, healthcare and cultural buildings, the number of permits increased by 20.2% y/y in January, fuelled by both segments too. Thus, the segment remained on upward trend since May, probably sustained by the new projects in industrial parks.

Broadly, the permits for new constructions started to show some improvements in the last months of 2017 sustained by a mild recovery of the private investment and of the EU funds absorption. The developments should sustain some better performance of the construction sector at the beginning of this year. The expectations point to a rebound in public spending as the EU funds absorption is seen to improve in 2018. Still, the rising interest rates might affect demand in the residential segment, with negative effects on the future developments of the permits for new buildings. The projected economic slowdown would very likely moderate the performances in the office buildings market. Yet, we expect further growth in the industrial parks construction, as the private investors interest in the field proved consistent so far.

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