by János Gáspár, head of research, EECFA Central
I see the current situation now as a combined supply-demand shock for the region’s construction market. This could be true to each EECFA country, but UA and RU are not in the position to be discussed right now. So, this is my framework of thinking:
- Supply side shock (on product market) causes cost increase
- supply chain issues for UA, RU (and China) construction materials (sanctions, war, transit problems)
- energy, fuel price hike
- FX rate
- Demand side shock causes delayed / cancelled construction investment
- decreasing real income
- tightening monetary conditions
- decreasing confidence
- decreasing corporate profitability
- uncertainty
- high geopolitical risk
- new pressures on budgets (refugees, energy, fuel price compensation)
The negative demand shock could be counterbalanced in some segments of construction in mid-term if business operations (services or production) have to be relocated from UA and RU. These could affect industrial building and warehouse, and office segments positively.
Besides, new demands could arrive for strengthening the defense industry, and investments aiming energy-security and energy-efficiency could also be prioritized and supported by policy measures. These could affect industrial buildings, energy production and transmission, and residential renovation segments positively.
And these factors can be considered for understanding country-specific impacts:
- exposure to trade with UA and RU (general, construction materials)
- exposure to RU energy
- exposure to war
- exposure to RU financing
- exposure to financial shocks (banking system, monetary policy regimes)
- non-EU members relations with Russia
- current cyclical position of a given construction market
The (fiscal and monetary) policy responses to these shocks will set the final picture.