European construction market seems to recover at a faster pace in 2016
The European market seems to recover at a faster pace in 2016. Where the market predictions looked very different in the last two years, overall growth figures can be seen now. For example the Italian and Spanish construction markets were hit quite hard during the crisis. But even in Italy and France, until now the worst performing countries, stabilization can be seen already or is expected to happen in the coming years. Spain and the Netherlands show the most promising growth figures in the coming years. These are some of the conclusions of the Q2 2016 European Architectural Barometer report, a quarterly research among 1,600 architects in eight European countries.
There is however an unknown in these predictions, the United Kingdom. The Q2 measurement was taken just before the Brexit vote. The figures for the UK are thus based on predictions & assumptions. The Q3 measurement will display the current sentiment and predictions post brexit.
Throughout 2015 British building permits seemed to stabilize resulting in one of the highest all time indexes for residential buildings. Normally an increase in building volumes can thus be seen in app. two years time. However we should be careful regarding the British market as uncertainty has risen in British economy in general. The outcomes of the EU referendum leaves a lot uncertain and a further destabilization of the British pound and market will affect the construction sector as well. Moreover (multinational) investors are suspending their funds in the UK which can have a big effect on construction volumes in the next years. Other indicators such as the development of the order book of architects do not show the positive figures that were seen in recent quarters. Also the expectation of architects towards their order book hasn’t been this negative since the end of 2014. The sentiment in the British construction sector seems to be tempered and it is highly uncertain if the expected growth figures in recent quarters will be visible in the coming months.
From Q3 2010 onwards there has been a steady positive development among the German architects. However 2015 turned out to be less steady with some fluctuations in both the Rolling Order Book and Rolling Turnover Barometers. This year shows a more stable image with both the Barometers showing a steady growth again. The image of a stable building permit development in Germany is still seen in recent quarters and became even more positive in the first quarter of 2016, especially the granting of residential building permits have increased significantly. Non-residential permits lie between a level of app. 95 and 100 (index 2010=100). Although this a very positive indicator for the German market, the German market relies strongly on renovation, which means the increase in residential building permits won’t have a very big impact.
The slightly positive developments that were seen in the French construction sector in the end of 2015 finally seem to continue in 2016. Many indicators become slightly more positive and for the first time since Q3 2011 more architects report an increase in their order book than a decrease. Also the positive development of the building permits throughout 2015 and in the beginning of 2016 are promising, although this effect will not be seen before 2017. Architects experiencing postponed projects have decreased this quarter, but still a substantial part of French architects experience cancelled projects.
The indicators are looking quite positive for Spain. In Q2 2016 the Rolling Order Book Barometer and the Rolling Turnover Barometer show positive signs, however they are still way below the point of before the crisis. But for the eleventh quarter in a row more architects experience an increase in their order books than a decrease. The granting of building permits do not show a stable image. Form quarter to quarter the granting of building permits fluctuates. Especially in Q4 ’15 a drop in building permits could be seen. A set-back which will hopefully be turned again in coming months. Other confidence indicators also still show negative figures, but overall are quite stable in recent quarters (i.e. no further decline in sentiment can be seen here). Still Spain is recovering from some very bad years and the sentiment seems to be not nearly as negative as in recent years which is reflected as well in less than a third of architects expecting an empty order book.
After two very positive years in 2014 and 2015 the Rolling Barometers is still positive in 2016 for the Netherlands. The positivity regarding order book and turnover continues among architects (142 for the order book and 122 for the turnover in Q1). The Rolling Barometers are the highest since 2011 and 2012 (Rolling Order Book Barometer: (+35!) and Rolling Turnover Barometer (+16). For the first time since the beginning of 2011 the Rolling Turnover Barometer was positive again. Also the number of architects expecting an empty order book is among the lowest which Arch-Vision ever measured. The positive architectural sentiment can also be seen amongst other indicators such as the confidence indicator for the construction sector and the industrial confidence indicator which are still positive. The building permits show some recovery again and the rise in building permits in 2015 will probably be visible from 2017 onwards.
architects report fluctuating figures for their turnover in the past months. Where 2015 was closed with a substantial growth in turnover, Q1 2016 shows the same figures as 2014 did. Luckily Q2 2016 shows some promising figures again. The Order Book Barometer, but also the Rolling Turnover Barometer show a stable growth throughout since the beginning of 2014. Both the Rolling Order Book Barometer and the Rolling Turnover Barometer have reached their highest point since the start of this research in Belgium and will likely continue to grow. The residential and non-residential building permits show a fluctuating image. The peak in the beginning of 2014 should become visible in the next quarters.
The second half year of 2015 showed a positive image regarding the Order Book Barometer and the Turnover Barometer for Poland. The Order Book Barometer development continued the positive flow which was seen throughout 2015. The setback of the Rolling Turnover Barometer in the first quarter of this year seemed to be temporary, as the positive flow of four quarters in a row is picked up again in the second quarter of 2016. The Rolling Order Book Barometer was rapidly becoming more positive and has the highest value since Q3 2013, still in Q2 2016 it continued to grow however, not as fast as might be expected based on recent quarters. Poland is a country which heavily relies on new build with respect to the construction sector volumes (almost 75% of its total volumes). Therefore the trend in building permits should be watched closely. The stable confidence indicators and the increasing building permits throughout 2015 will have a positive influence on the mid-term. However the residential building permits seem to have a (temporary?) setback in the first quarter of 2016.
For more information please feel free to contact me at Hoogenboom@usp-mc.nl
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