Forecast for bulgaria
After impressive growth between 2005 and 2007, in H2 2008 the construction market in Bulgaria started to level off, and in 2009 it is expected to shrink - this is one of the conclusions in the latest report from PMR, a market research company, entitled "The construction market in Bulgaria 2009 Development forecasts for 2009-2011"...
GDP growth in Bulgaria is expected to slow visibly in the next few years, with a slight reduction very likely in 2009.
At the same time the economic climate in construction
declined significantly in Q4 2008 and Q1 2009 and returned to the level seen in
the years 2002-2004, a period of minor growth in construction. The liquidity of
construction companies is very low, and barter payments are becoming common.
The construction industry will suffer from the withdrawal of many external
investors from the property market. At present many projects at the point of
negotiation with contractors have been brought to a halt. In addition,
investors in apartments and residential areas have been delaying their payments
to contractors.
On the Bulgarian residential market the slowdown became apparent in the final
months of 2008. New buildings and sales of flats were strongly affected by the
financial limitations imposed by the banks.
At the moment the number of mortgages approved by the banks in Bulgaria is falling by 80 per cent on an annual basis, and the banks are now offering mortgages of only up to 70 per cent of the value of the property.
Holiday homes are a prominent factor with regard to the anticipated decline in the residential arena, as most of the clients came from the countries hardest hit by the crisis, such as the UK and Ireland.
The non-residential arena will also suffer from the financial crisis, as the largest projects which were supposed to have started this year have been postponed until an improvement has been seen.
Of 20 malls and shopping centres announced for Sofia, fewer than half
have a realistic chance of being built, and even these are not very likely to
begin in 2009. The two largest projects in the non-residential arena, worth
£628 million, have been cancelled, and this will definitely have an adverse
effect on the market.
The situation is similar with regard to office building. There are very few
projects being built at the moment, and the total area does not exceed 230,000
m², despite the fact that at the beginning of 2008 it was expected that more
than 800,000 m² would be opened by the end of 2010. Another interesting trend
is that of re-renting offices with the sole purpose of cutting costs.
On the other hand, the logistics and industrial areas have been much less
severely affected by the crisis. With regard to logistics, there is still a
deficit in the supply of modern warehouses in Bulgaria. One of the reasons for
this is that some of the new premises were built by companies which need them
for their own purposes, and these premises do not go to the open market.
Civil engineering construction in Bulgaria is expected to continue to
grow slightly in the coming years, but only single figure growth rates are
possible. The development of civil engineering construction will be aimed
mainly at two areas: transport infrastructure and environmental development and
protection, financed mostly from EU funds.
According to Bartlomiej Sosna, a Senior Construction Analyst at PMR, "The very
limited experience of the Bulgarian Government with regard to the prompt
spending of EU funds will mean that civil engineering will not fully redress
the decline in residential and non-residential construction.
It is probable that 2010 will be worse than 2009, because in
2009 the construction companies will be completing many projects started in
2007 and 2008".
Source: PMR Publications