This report covers the market developments in Q4/2014, FY 2014 and the data available as of March 2015.

In 2014, Romania’s construction market hit the lowest level since its peak in 2007, head of the constructions’ association ARACO, Laurentiu Plosceanu, estimates.The market contracted by 4% y/y to €8.9bn. Infrastructure works have severely contracted on subdued public capital expenditures while residential segment surprisingly gained ground – heralding what is expected to become stronger recovery this year. Infrastructure works depend on the public investments, which are still uncertain despite government’s promises. Major fiscal reforms planned as of June (VAT cut) and January 2016 (New Fiscal Code) create better environment for investors, but put at risk government’s capacity to finance such investments on medium term.

The construction works volume plunged by 6.7% y/y in 2014, steepening from the 0.6% y/y decline in 2013. The civil engineering segment, which accounts for the largest share of the construction market, plunged by 21.8% y/y during the year, driving downwards the performance of the entire sector. Residential constructions surged by 32.6% y/y, while non-residential constructions increased by 16.6% y/y in 2014.

In Q4/2014, the construction works index inched up by 2% y/y, after having declined at double-digit y/y pace in all the previous three quarters. The civil engineering segment however continued to contract significantly over the quarter. The buildings segment performed better in Q4, yet throughout the year both the residential and non-residential sub-segments recorded fluctuating performance.

The real estate market maintained its dynamics in Q4, when the value of transactions reached €514mn, according to market estimates. The total investments volume last year totalled €1.3bn and considering the number of properties under negotiations on all segments of the market, the same cheering performance is expected this year as well.
The subdued activity in constructions in 2014 creates a low base for this year’s performance, yet the recovery (and potential growth resumption) of the sector remains linked to the authorities’ decision to revive public investments in infrastructure and the improving absorption of EU funds.

Key points:

• Construction works index up marginally y/y in Q4, full year performance remains negative
• Number of residential permits drops 0.5% y/y in Q4/2014
• Value of real estate transactions reaches €514mn in Q4/2014 - study
• Modern retail space deliveries to reach 166,000sqm in 2015-2016
• GTC sells commercial centre in Buzau to Eurosting group