New builds laying the foundations for growth in the construction industry

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New builds laying the foundations for growth in the construction industry

  • More focus on transforming vacant properties
  • All segments of the construction industry set to profit from the recovery on the housing market
  • Added opportunities from the focus on area development

New builds driving construction industry growth

The recovery on the housing market is structural, and almost all segments of the construction industry are profiting. For example, the number of new builds is set to increase sharply, and in 2015 will replace renovation as the driving force, ABN AMRO concludes in its Vision on Construction and Property 2015. Confidence in the housing market is at an all-time high. Its recovery is visible in the rising number of transactions, marginally higher house prices and increasing order books: from 5.5 to 7.2 months. In 2014 orders for new residential builds were up 40.5 percent against 2013. The number of homeowner transactions is also on the up, rising 39.4 percent. Almost all segments of the construction industry are reaping the benefits. For example, in 2014 architectural firms recorded their first annual increase in revenues since 2008. Installation contractors also reported higher revenues. In addition to existing homes, the market for new builds is also recovering strongly in these segments. Revenues in the wood and construction materials industry are set to rise in 2015 for the first time since 2011, again with new builds providing the principal engine.

Transformation as the future

To further improve its outlook, the construction industry must focus more on transforming properties, ABN AMRO believes. It is important, for example, to provide more homes of types that will be needed during the coming years. The aging population and the fact that people are spending more time as single-person households are creating a demand for small, modified homes. This will also serve to prevent vacancy. In areas of contraction vacant properties can be converted into homes, while in more viable locations offices can be transformed into homes or student housing. Countless schools and care homes are also outdated and need to be renovated.

New growth markets: opportunities for the construction industry

ABN AMRO believes that builders will find ample opportunities if they focus on new growth markets such as renovation, redevelopment and transformation. ‘Examples include making homes and utilities buildings more sustainable, transforming office buildings and converting vacant care complexes into homes suitable for older people,’ explains Madeline Buijs, Sector Economist Construction and Real Estate at ABN AMRO. ‘Builders will also need to shift their focus more to area development instead of standalone projects. Inner-city development is becoming more prominent, for example. This requires a high level of expertise, which is where builders can stand out. The initial recovery means that after a number of lean years subcontractors will be in a better starting position as the construction market recovers.’

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