Poland's construction industry to grow?
Published on 12/03/2015
Poland's construction market has had its ups and downs recently. The last few years are generally thought not to have been kind to the country's industry, affecting investment and activity across several sectors. However, the latest data shows a very different picture, indicating that Polish building is set to grow rapidly over the next year.
The nation's construction firms are in much better shape than before, benefiting from a stronger economic climate, and this in turn is boosting international investment. What is even more remarkable is that this is very much not the case across much of the rest of the world.
With global construction investment generally shrinking, Poland and the surrounding countries are bucking the trend and becoming one of the go-to spots for international traders. Here are a few of the signs that the Polish construction industry is set to expand impressively in 2015:
Investment is rising
One of the best signs that the Polish construction industry is set to grow, is that it is attracting a lot of foreign interest. This is despite falling investment in real estate, which dropped by 6.3 per cent in 2014 to a total of $1.21 trillion.
It is thought that this is caused by a decrease in Chinese land purchasing. However, in central and eastern Europe investment is predicted to increase by a significant amount in 2015, bucking the global trend.
According to data from Cushman & Wakefield, the largest private real estate services company in the world, investment in central and eastern Europe is anticipated to grow by 30 per cent in 2015. This would make it the fastest-growing region in the world.
Poland attracted almost $3.8 billion of investment in 2014, so if Cushman & Wakefield's estimates are correct then 2015 could see that increase to over $4.9 billion. Their figures also show that Warsaw is in the top 20 global cities for attracting foreign investment, placing 19th with around $2 billion invested there in 2014.
Housing demand has increased
So why is there a sudden increase in investment in Poland? Part of this is due to a boost in housing demand in the country. A number of economic factors are driving more and more Poles to purchase homes, which is proving incredibly beneficial to the construction industry.
First of all, low interest rates make it easy for Polish people to obtain financing and mortgage loans. This has been the case for a while, but now this has been combined with a growth of four per cent (between January and October 2014) in Poland's nominal wages and a year-on-year drop in the unemployment rate of around two percentage points. This means more people in Poland are able to afford homes.
This is having a clear effect on the construction industry. Grzegorz Sielewicz, chief economist for industry analyst Coface, told Rzeczpospolita: "The number of apartments sold is growing and there are more construction permits being issued. The market improvement will also benefit producers and distributors of building materials."
This has helped to turn the building industry's fortune's around. After the construction output shrank by 11.1 per cent in 2013, it is thought to have grown by 3.3 per cent last year. Coface's forecasts anticipate it improving again in 2015, expanding by approximately 6.8 per cent.
The industry is becoming more solvent
All this is leading to a much better environment for construction businesses. While 2013 and the preceding years were hard for Polish building, the sector has improved significantly since then. Coface reports that the number of construction firms filing for bankruptcy has fallen by 21 per cent year-on-year.
In fact, the sector has shown the most improvement in this area out of all the areas of Polish business. Things are not perfect, of course. Vulnerable companies, such as small contractors, are still the main candidates for bankruptcy. The industry also has a general problem with late payments.
However, overall the Polish construction sector is much more solvent than before. Buoyed up by strong housing demand and financed by increasing numbers of foreign investors, it looks set to see impressive growth in the next year and is an excellent market to sell to.