Construction industry due for a recovery in 2015

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Improving housing market

The construction industry is heading for growth at 2 per cent, ABN AMRO predicts, with more homebuilding a particularly important contributor. No negative figures are expected from any other sector of the construction industry.

2014 a transition year towards recovery in 2015 Madeline Buijs Madeline Buijs Sector Economist Construction and Real Estate

2014 a transition year towards recovery in 2015

At ABN AMRO , we expect to see the green shoots of recovery in the construction industry in 2014. We predict a decline in construction output of a mere 1 per cent this year, with modest economic growth and growing corporate spending dampening the fall in output and turning 2014 into a transition year towards a true recovery in 2015. In that year, the construction industry looks set to rebound across the board, for one thing because companies are expected to spend more and private consumption to record an uptick, and, for another, because we see the Dutch housing market hitting bottom in 2014, followed by a revival in homebuilding – the most important sector for the construction industry.

Residential housing construction 3.5 per cent up in 2015

At ABN AMRO, we expect residential housing construction to decline by 2.5 per cent in 2014, but projections for 2015 envisage growth of 3.5 per cent, even if this is still held back by high land prices among other factors. Renovation projects should show the first signs of recovery, as this market should gather momentum from VAT cuts on labour costs. Housing starts, by contrast, should lag behind, as there has been no rebound in the number of building permits issued. What’s more, residential housebuilders have cut investment in the wake of government-imposed landlord levies. And yet we expect new housebuilding to move firmly into the black in 2015, as construction companies can draw on their overcapacity to get construction output moving faster.

Commercial property leading the way

Construction of industrial and commercial properties should pick up on the back of an improved economy and rising company investment as early as 2014, and we expect this to continue into 2015. The renovation of commercial buildings is likely to go first, before new builds also take off. In particular, we foresee greater construction industry activity in storage space and industrial buildings, in keeping with online shopping trends and the expected upturn in industry. Demand for social property remains a constant.

At ABN AMRO, we expect civil engineering projects to continue to feel the pinch of government spending cuts in 2014, particularly affecting new construction projects. That said, the Dutch government still frees up funds for infrastructural maintenance and management, and 2015 should see some growth on the back of higher corporate investment.



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