Romania: Permits for new residential buildings drop by 1.9% y/y in April

The number of building permits for new residential buildings decreased by 1.9% y/y to 3,665 in April, notably deteriorating from a 12.1% y/y rise in March, according to data released by the state statistical office (INSSE). Therefore, signs of recovery in the domestic construction sector seem to fade. Following sustained and accelerating growth since December 2018, new residential permits fell again, raising worries that the construction sector would start to deteriorate again this year. Nevertheless, we note that some private developers remain optimistic and have plans to start new residential projects. Thus, a major worsening in the sector would be cushioned by still coming private investment in residential segment. A relatively high base might affect figures in the following periods, but that should fade as of August.

Permits for administrative buildings jumped by 58.8% y/y in April. Investor interest in that segment was weaker at the beginning of 2019, mostly because enthusiasm for office buildings has faded. Besides, office building construction increased significantly at the beginning of 2018, setting a high base for this year’s figures. However, office building construction might continue in 2019, because new residential projects started to come together with office buildings or other administrative construction, in more complex residential projects. As for 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 dropped, chiefly on the back of a high base.

Generally, construction permit developments at the beginning of 2019 indicate that interest in new buildings persists. There are still numerous developers who remained optimistic about the real estate segment in Romania in 2019, even though economic activity is expected to slow and demand to contract. Growth in new house construction is perhaps fuelled by the fact that more households decide to relocate to rural areas. Still, the private sector seems to be the major source for improvement so far, even if the government also committed to start building more schools and kindergartens in 2019.

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