Expansion of the wall materials market in Poland to accelerate in 2011

2010-08-06

The improvement in the economic situation, increased activity by banks in terms of property financing, and the beginnings of a revival in developer construction will all contribute to the beginnings of a revival in the wall materials market in Poland in the coming months.

After a poor start to the year, in the second half of 2010 the wall materials market will see the pace of production increase, and grow over the whole year by approximately 5% to around PLN 2 billion. In our most recent report, entitled “The wall construction materials market in Poland 2010. Development forecasts for the years 2010-2012”, we estimate that this market will only recover in 2011. After 2008 and 2009, which were very difficult years for the segment, the coming years look much more promising, largely due to the improvement in the residential market, the most important market for firms from the wall materials segment.
After a drop in January, the next four months saw increasing growth figures for numbers of new residential starts. In all, in the period Jan-Jun 2010 construction of 66,600 new residential units was begun in Poland, which represents an increase of 26.5% on the same period of last year. If this growth rate continues until the end of the year, investors will have begun construction of 180,000 homes across 2010, just 5,000 fewer than in the boom year for the wall materials segment of 2007.



The main contributors to such a dynamic level of growth are developers, who in recent months have started work on both new projects and others halted in 2009. Of considerable significance here is the improvement in the mortgage loan segment – at present banks are returning to a policy of issuing loans for 100% and more of the value of a property, and have announced that they will be cutting their margins on loans. The number of transactions on the primary residential market is also rising, and this is encouraging the largest domestic developers to launch new residential projects from the beginning of 2010. There are still no signs of a significant revival in single-family construction, which is the biggest market sector for sales of wall materials in Poland, with 45% of all residential units under construction budowanych mieszkań, 65% of residential area, and as many as 90% of residential buildings currently being built.
As the number of new residential starts has grown, so the production dynamic of basic wall materials has improved. After two years of regression and a weak start to 2010, in subsequent months of the year the growth rate of output has picked up, although analysts are of the opinion that stronger growth is not to be expected until individual investors become more active, which might not happen until 2011.



Although there are the beginnings of a revival in residential construction, we do not expect to see sharp increases in the prices of wall materials of the magnitude seen in 2007, partly because the current revival is largely restricted to multi-unit developments, which consume a smaller volume of wall materials than single-family housing. In the longer term, prices are expected to stabilise, with possible rises of a few percent to take account of manufacturers’ increasing costs of such overheads as electricity, pay and transportation.
Another potential bonus for wall materials manufacturers operating in Poland is the recent weakening of the zloty, which is protecting the market from competition in the form of imported wall materials and strengthening the position of manufacturers exporting materials produced in Poland to other countries in the region.

Bartłomiej Sosna
Senior Construction Analyst
PMR Publications

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