Construction industry in view of COVID-19 – impact of the pandemic on the construction and real estate sector [Kochański & Partners report]

26 June 2020 | Knowledge, News

Polish construction and real estate businesses are doing surprisingly well in the face of the coronavirus pandemic. The sector is now recovering following early slight losses. However, the question arises how the market will react to the drastic decline in the number of granted mortgages.

 

Construction and real estate sector in Poland

The Polish construction and real estate sector has reacted extremely softly to the pandemic, recording a fall of 21-26% in mid-March. Moreover, the indices show a positive trend, a high recovery rate. We particularly observe dynamic increases in the construction sector by as much as 16%, compared to the beginning of the year. Real estate businesses have been recovering slightly slower, but systematically.

 

Impact of COVID-19 on the housing market

However, the question arises as to how construction and real estate businesses will respond to the current dramatic decline in mortgages granted. Bank credit policy restrictions and borrowers’ reluctance to incur financial liabilities may affect the level of housing prices in the months to come and, consequently, the financial performance of businesses. However, the continuing crisis in the banking sector suggests that banks will soon decide to make their approach more flexible.

 

International context

The situation of the Polish construction and real estate sector is relatively good, especially when compared to foreign markets. COVID-19 has particularly strongly hit the U.S. market experiencing drops of 36-39% in March, compared to the beginning of the year. The slow recovery rate is also worrying: by 1 June, the indices had returned to 13-15% below the January value.

Despite this, sentiment in the U.S. market allows us to be optimistic about the future of the industry. The number of rental offers in the local housing market has also been on the increase, with real estate prices slowly approaching their pre-pandemic level. Analysts also predict gradual development of the U.S. construction sector by 2024.

We have also recently seen an improvement in the condition of the construction and real estate market in Germany. In June, the index of construction businesses was 26% lower than at the beginning of the year, with the real estate index recording a slight loss of 4%, contributing to the strengthening of the sector’s position and, consequently, to an increase in real estate prices.

 

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