Polish construction grows faster than expected, housing disappoints

The Polish construction sector grew faster than expected in February, thanks to infrastructure projects, but residential housing continued to perform poorly. ING Bank says this trend will continue in the coming months.

According to figures from Poland’s Central Statistical Office (GUS), construction sector output rose 6.6% on-year in February, and by 10.6% versus January. This is versus the on-year growth consensus of 2.1%. The increase was thanks to 21.5% on-year growth in civil engineering construction and a 4.3% increase in speciality construction.

The growth is likely to be “the effects of finalising infrastructure projects in the last settlement year of the old EU [funding] perspective,” ING senior economist, Poland Piotr Poplawski says in a note sent to Kallanish.

Meanwhile, in the first half of last year, the number of housing units under construction was historically at its highest levels, but as demand declined, it began to decelerate rapidly. “The current supply of apartments from developers is able to cover the current demand for almost a year. Therefore, developers are completing projects already started, but not starting new ones,” Poplawski explains.

“The construction situation in the coming months is likely to be a product of the still unfavourable situation in housing and the completion of projects, from the old EU perspective (when local government authorities rushed to finish projects to use all of the remaining EU money),” he continues.

“The prospect of the government’s launch of mortgage support programmes may even weaken demand for housing in the near term … until the programme’s launch, among households hoping to take advantage of government support. In contrast, the experience of previous EU perspectives shows that the last settlement year is conducive to relatively high activity in infrastructure construction,” Poplawski concludes.

CMC, which has a long steelworks in Poland, said in January that after a strong period, Polish residential activity is showing signs of a slowdown due to rising mortgage interest rates (see Kallanish passim). Although Polish mortgage origination declined meaningfully over the last several months, programmes are being developed to support first-time homebuyers, which should attract more market activity by mid-2023, it added.

Adam Smith Poland