Constructionshows
The state of the Ukraine’s infrastructure is far behind that of European countries. The average housing space per inhabitant is about 23.7 m², which is less than 30 m² levels recorded in most European countries. In addition, 3.7 km of hard surfaced roads per 1,000 inhabitants in Ukraine is short of the level recorded in many developed countries, where this indicator exceed 10 km. As well, there was recorded only 46 m² of quality shopping space per 1,000 inhabitants at the end of 2011, well below the amount witnesses even in the less developed Central European countries.
According to the latest report entitled “Construction sector in Ukraine 2012 – Development forecasts for 2012-2015” published by a research company PMR, the construction industry in Ukraine continues to express an uneven development trend. In 2011, it succeeded to resume the upward run and gained 11% y-o-y in real terms, after three years of dramatic contraction. However, this upward trend is not expected to be followed this year. During Q1-Q3 2012, the value of construction works carried out in Ukraine lessened by 9.1% in real terms, even though in nominal terms it posted a 9.7% expansion. This spread was decisively influenced by prices within the construction industry, which have risen somewhere between 11% and 16%. The most substantial increase in prices during January-September 2012 were recorded in the construction of transport infrastructure (15.2%) and residential construction (14.9%).
In terms of geographic breakdown, in 2011, upturn in construction output was witnessed in 19 of the 27 administrative units of Ukraine, whereas during the first three quarters of the year only five provinces succeeded to achieve positive dynamics. Resumed downtrend in most regions was fuelled by the high base for comparison posted last year, and the economic slowdown experienced during the first three quarters of 2012. In addition, with most of Euro 2012-related projects being completed by the end of 2011, this year the government dwindled disbursements for infrastructure projects.
In the recent period, the construction industry in Ukraine has been growing considerably on projects related to preparations for Euro 2012, almost all of these being financed from the state and local budgets. As a result of insufficient financing during 2009-2010, a lot of Euro 2012-related infrastructure projects struggled to stick to the initially set timelines, therefore, in 2011, Ukrainian authorities were urged to speed up investments to complete those projects on time. In nominal terms, the total value of construction output recorded in 2011 gained 40% over the year, whereas in real terms it advanced by only 11%. The support provided by public authorities was complemented by strong economic growth. In 2011, GDP growth rate accelerated to 5.2% from 4.1% reached a year earlier.
Nevertheless, Ukraine’s construction market is poised for a strong recovery in the years to come. Regardless of the somewhat reluctant bank lending to the construction sector, and the uneven recovery in demand for housing, overall construction activity in Ukraine will continue to grow. In 2013, strong growth is to be seen in areas such as economy-class residential property, shopping centre real estate, the development of wholesale agricultural produce logistics facilities, road construction, and natural gas exploration.
One of the major issue will be addressed by the problem sector in the years to come will be the road network, which is in poor condition. About 56% of national roads are in need of extensive modernisation. Ukraine’s roads do not meet the required standards in in terms of flatness (51%) and strength (39%), as well a large share of sections of the country’s railway network still feature wooden railway sleepers, of which 15-17% are not considered suitable for further use.
With regard to the residential segment, it is in need of large-scale investments as well. Of all Ukrainian administrative regions, only the Kyiv Province has more than 30 m² of housing space per inhabitant. By the end of 2011, the indicator had reached 32.4 m² in the Kyiv Province, topping the second-best region (the Chernihiv Province) by almost 5 m². In order to reach at least the 30 m² of residential area per inhabitant, which is seen in most European countries, more than 283 million m² of housing will need to be built and this is assuming that all current residential properties will remain in use.
In 2011, Ukraine’s housing stock recorded a net increase of 6.5 million m², expanding to 1,086 million m² by year-end. During the first nine months of 2012, housing construction activity continued to gain momentum. Total space of newly registered housing surged 37.9% y-o-y and reached almost 6.8 million m², of which 69.7% was commissioned in urban areas.
This press release is based on information contained in the latest PMR report entitled ”Construction sector in Ukraine H2 2012 – Development forecasts for 2012-2015”.
