The report covers developments in the SEE construction and real estate sectors in the period from March 2013 to March 2014.

Construction activity contracted in most counties in Southeast Europe in 2013 continuing a trend from 2011. Even though economies in the region have recovered in 2013 posting slight growth rates, the economic activity should strengthen further to provide the much needed boost to the construction sector. SEE governments are still trying to cut costs in order to meet targets for smaller budget deficit so funds for infrastructure projects continue to been reduced. Mainly projects that were co-financed with European Union’s funds were started last year.

The outlook for the industry’s development in 2014 is more optimistic with most countries in the region expected to strengthen growth this year amid the recovering EU economies, which are the region’s main trading partner. The civil engineering sector is again expected to be better positioned than the buildings construction and the pace of expansion will depend on the absorption of EU funds.

The crisis in Ukraine, however, poses a risk to the European economies, especially those in south-eastern Europe, as eventual sanctions on Russia following the annexation of Crimea would negatively affect the economic growth.
Commercial property investments in Central and Eastern Europe (CEE) jumped by 37.6% in 2013 with Romania attracting the highest volume of investments of the countries under review in this report. Croatia followed, ahead of Slovenia, Bulgaria and Serbia. The outlook for CEE is also positive but the annual pace of expansion in 2014 is seen to weaken to only 4% to USD 24.9bn.

As in 2012, investments in retail property dominated the real estate market in 2013 with most SEE countries adding new shopping centre space. Albania, Bulgaria, Macedonia, Romania and Serbia are expected to add new retail space this year as well. Activity on the office property market also higher than in 2012 as the majority of countries in the region witnessed new supply.

Regarding the residential property market, home prices in 2013 increased only in Albania and Montenegro, stagnated in Bosnia and fell in all other countries.