Recovering European construction markets show positive development

Jeroen de Gruijl

Door Jeroen de Gruijl
26 okt 2016
Nieuws, ,

Seven out of eight European construction markets which Arch-Vision focuses on seem to have found the path of recovery. Where the Dutch and Spanish construction sector are still the two markets that show the highest growth figures, there is also positive news for other markets such as the French market as we can see a stabilization in this market in 2016 and even slightly positive growth figures in the coming years. Still the Italian market is the only one not showing signs of recovery. It seemed this market had hit rock bottom, but still a further distraction is expected here. Following “Brexit” there were some doubts in the United Kingdom about the construction market, but architects and also other indicators now show a more comforting image, although on mid-term it is still uncertain where the British market is going to. These are some of the conclusions of the Q3 2016 European Architectural Barometer report, a quarterly research among 1,600 architects in eight European countries. European architects act as a leading indicator for the construction activities.  The post-Brexit figures look quite promising for the British construction sector. Expectations towards the British construction sector were negative as it would be one of the first sectors to be hit by the outcome of the referendum. Q3 2016 shows a recovery on most indicators. The building permits remained stable, less architects expect empty order books and also the order book and turnover development show positive figures. This positive sentiment could be partly caused by a resilient housebuilding industry and announced governmental funding. However we should be careful as international investors are still restrained. Arch-Vision figures show that the majority of British architects, on short term, don’t expect a strong decrease of the construction sector in the UK. Although almost a third thinks a decrease will take place. On a longer-term investments and funding are expected to dry-up, and a lot of uncertainty remains as a large share of architects don’t know what they can expect in the coming months according to Arch-Vision Q3 results. Still, Arch-Vision expects no major effect on the development of the building volumes for 2016 (+2%). For 2017 and 2018 it remains unsure where the British construction sector is heading to. Positive growth figures as expected in Q1 2016 won’t probably be seen, therefore Arch-Vision predicts a neutral scenario for 2017 and 2018 (0%).   As we noticed 2015 to be a slightly less stable year for the German construction sector it seems that some doubts regarding the sector could be taken away. Several indicators for the German market show promising figures. The positive sentiment among architects seems to be recovered as the architects expecting an empty order book is back at the 2014 levels. Also the architects that experience cancelled or postponed projects has dropped in the last quarter which indicates that projects will be executed. The development of the architects’ order book and turnover is still positive meaning more architects report an increase in their order book and turnover than a decrease. Confidence indicators for the German economy have become more positive as well. For the first time since the start of the Arch-Vision study the construction confidence indicator became positive. Together with the still stable development of the building permits Arch-Vision predicts a positive development of the German market for 2016 (+3%) and a continuation of a 3% growth in 2017 and 2018.   For the second quarter in a row, and for the third quarter in the past 12 months, the order book of French architects is growing. The development of the turnover of French architects seems to have a (temporary?) setback. Fortunately, the number of architects expecting an empty order book is stabilizing at its lowest point since 2013. Also the building permits seem to stabilize and even grows for residential building. Several other indicators however still show a worrying image as more than half of the architects experience postponed projects and a third even are confronted with cancelled projects. An active French government is an extra stimulus for a stabilizing construction sector. Especially with funding in the housing sector and adjusting tax laws. Also all indicators that showed negative figures until the end of 2015 have been somewhat stabilized and show a more positive image of the French market now. Therefore Arch-Vision predicts a stabilization of the market in 2016 (0%) and even slightly positive figures (+1%) for 2017 and 2018.   The worst time for the Spanish construction sector definitely seems to be over. After 2015 showed growth figures for the first time, 2016 is becoming an even better year. Still we have to keep in mind that building volumes in Spain are not nearly as high as in 2009. Architects expecting an empty order book hit an all time low since the start of the Arch-Vision measurement. Also order book and turnover development of Spanish architects keep on being positive, which has a positive effect on the rolling barometers. The positive sentiment is not clearly seen in the development of the building permits. Still fluctuations can be seen, especially for the non-residential sector. Due to the positive sentiment among architects, and based on other stabilizing confidence indicators, more positive years in Spain can be expected. The 4% growth in building volume in Spain in 2015 is the path Arch-Vision expects the Spanish sector to follow in 2016 and 2017 and even a further 5% growth in 2018.   In recent quarters it seemed that the Italian construction sector finally had hit rock bottom after seven consecutive years of contraction of the building volumes. However we should be careful as many indicators in Q3 2016 are showing a negative development compared to the slightly positive movement we saw in recent quarters. After improvement of the sentiment among architects Q3 2016 shows a setback regarding order book and turnover development, but also regarding the expectation of empty order books in the next twelve months. Although the building permits for non-residential is improving, a further decline in building permits for the residential markets can be seen; resulting in the lowest index since 2009. Considering all indicators and the volatile Italian market Arch-Vision predicts a slightly further contraction of building volumes in 2016 of -1%. For 2017 and 2018, based on recent quarters Arch-Vision still predicts slightly negative development with growth figures of -1% for 2017 and 2018.   Since 2011 Dutch architects have never been so positive regarding their order book and turnover development. More architects show an increase than a decrease in their order book and turnover resulting in the Rolling Barometers to be the most positive since the start of the research (+123 and +44). Although recent growth was mainly caused by an improving residential market, the building permits for non-residential is improving as well in 2016. Other confidence indicators are all positive and show further improvement compared to Q2 2016. All these indicators clearly show that the Dutch construction sector has found the road to recovery and is still heading in this direction, although we should not forget where the Dutch construction sector is coming from. Promising figures can therefore be expected in the coming years. Arch-Vision predicts an increase of 6% in 2016 and further growth figures of 4% in 2017 and 5% in 2018.   2016 so far turns out to be quite a good year for architects and the Belgian construction sector in general. More and more architects report an increase of their order books and turnover resulting in positive Rolling Barometers (Rolling Order Book barometer: +164, Rolling Turnover Barometer +102). Also the number of architects that expect an empty order book within the next year has dropped again (9%) after a slight increase in Q2 2016 (15%). Where in the first quarter of 2016 a peak in building permits for both residential as well as non-residential could be seen, Q2 2016 shows a decline again especially for the non-residential building permits. Overall the Belgian construction market has proven to be one of steady and modest growth which Arch-Vision expects to continue in the coming years: +3% in 2016, +2% in 2017 and 2018.   The Polish construction sector still heavily relies on new-build and especially investments in the residential market seems to be one of the drivers behind growth figures in recent quarters. Therefore the building permits are important to take notice of. Non-residential building permits keep showing positive development, however a setback for the first time since Q4 ‘14 can be seen in the residential building permits. Fortunately the sentiment among architects is still relatively positive. A positive development of the order book of architects looks promising and also the number of architects expecting an empty order book in the coming twelve months have hit an all-time low. Unfortunately Q2 2016 figures for the building permits were not available yet, and it will be interesting to follow this development. Nevertheless, other positive indicators and the positive sentiment among architects leads to a positive prediction of the Polish construction sector for the next three years (2016: +3%, 2017: +3%, 2018: +4%).   Please find an overview of the most important figures on the next page.  More informationPlease contact Arch-Vision: Mr. Jeroen de Gruijl, degruijl@arch-vision.euTel. +31 (0)10 206690026102016_6

About the European Architectural Barometer

The construction industry operates in a late cyclical market, which means that the buildings designed today will not be completed until at least two years from now. For that reason, architects are a good indicator for future building volumes. Besides that, architects are also very influential in how projects are built and which materials are used.

The European Architectural Barometer is a quarterly research among 1,600 architects in Europe. Four times a year, this study is conducted by Arch-Vision in the United Kingdom, Germany, France, Spain, Italy, the Netherlands, Belgium and Poland. The research covers the developments of architectural turnover, order volumes and the impact of the crisis. Besides these economic statistics, a topic is highlighted each quarter.

About the barometers:

The Quarter-to-Quarter Order Book Barometer presents the development from quarter to quarter. The Indicator is calculated on the basis of the answers given by the architects every quarter.

The Rolling Order Book Barometer is a cumulative indicator comparing the development in the current quarter to the quarter before the first measurement in Q4 2008. The main goal of this indicator is to show with regards to 2008 whether the order books of the architectural practices are recovering or not.

About the forecast model

The correlation with building volumes is tested for a total of 11 market indicators together with 2 outcomes of Arch-Vision. The correlation of the following 5 indicators appeared to be strongest:

  • Building permits – m² of useful floor area in non-residential buildings
  • Building permits, number of dwellings
  • House sales (existing houses)
  • Development of Turnover Barometer at architects (Arch-Vision figures)
  • Number of FTE working at architects (Arch-Vision figures)

 

The predicting value of these indicators is between 54% and 91%.

The forecast for 2016, 2017 and 2018 is based on the market knowledge of USP Marketing Consultancy together with the market figures and the statistical model used by Arch-Vision for the predictions in previous years.