Construction in January accelerated growth sharply to nearly 30%

Prague - Construction production significantly accelerated its year-on-year growth in January; in constant prices, it increased by 29.2 percent after a 15.4 percent increase in December. This was announced today by the Czech Statistical Office. The growth, which is the highest in the last three years and the second highest since measurement began, is due to very favorable climatic conditions that allowed builders to practically carry out all construction work without limitation.
     Spokesman of the construction company Metrostav, František Polák, believes that the January result is just a fluctuation. In January, companies invoice contracts from the previous year, which is why, according to him, the increase in construction production was so pronounced. According to Polák, construction will not grow as quickly this year as it did last year.
     According to analyst Vladimír Pikora from Next Finance, it was not just a one-time good result. The construction industry has been thriving for the past 12 months as well. In his opinion, the rapid growth is driven by long-term cheap and increasingly accessible mortgages, a rise in real average wages, expectations of further increases in property prices, and a fear among many families of a higher VAT on construction work related to housing.
     Residential construction production is expected to grow this year according to Pikora, despite the generally anticipated increase in mortgage loan prices. Pikora sees the main reason in the completion of constructions hurriedly initiated out of fear of an increase in VAT on construction work for housing starting in early 2008.
     However, Pikora warned that the growth will not be eternal. The first signs of a slowdown can already be observed - the number of employees in construction, the number of building permits issued, and the number of apartments approved by building authorities are declining.
     The number of employees in construction companies with 20 or more people decreased by half a percent year-on-year in January. Their average nominal monthly wage increased by 15.5 percent year-on-year to 19,462 CZK. In real terms, it increased by 14%, the Czech Statistical Office reported.
     Building authorities issued 8,410 building permits, which represents a year-on-year decrease of 2.8%. New construction will result in buildings worth 13.1 billion crowns and renovations worth 6.7 billion crowns.
     Building authorities approved the construction of 2,587 apartments, which is 300 fewer than in January 2006. The indicative value of newly approved apartments in residential buildings was 7.6 billion crowns.
     According to data published by Eurostat, construction production in December 2006 increased by 6.7% in 25 EU countries after adjusting for the effects of the number of working days. Among the member states for which data was available, construction production increased the most in Slovenia by 30.3%, in Romania by 24.2%, and in Slovakia by 20.1%. Conversely, the largest decrease, by 10.7%, occurred in Portugal.