The construction industry in the Czech Republic experienced a minor year-on-year decline in August, with a reduction of 0.2% compared to the same period in the previous year. This decline represents an improvement from the previous month’s 2.1% decrease. While ground construction projects, such as building structures, performed relatively better, engineering construction production, which includes road building and telecommunication and energy networks, saw a decline. On a month-to-month basis, the construction industry recorded a 2% increase. The findings were reported by the Czech Statistical Office (ČSÚ) on Monday.

Ground construction production showed a modest increase of 0.6% compared to the same period in the previous year, while engineering construction experienced a 2% decline. Petr Dufek, the chief economist at Creditas Bank, noted that this month was more favorable for ground construction, but it’s essential to consider that the month-to-month results are compared to a lower base in July. He also emphasized a key challenge facing the industry: a lack of new orders, particularly in the private sector, where economic stagnation has deterred new construction projects in both commercial and residential sectors. Additionally, high construction material prices persist despite reduced demand, prompting manufacturers to limit production.

In August, the number of building permits issued by construction authorities decreased by 8.4% compared to the previous year, totaling around 6,800 permits. However, the estimated value of these permits increased, driven by the approval of nine projects with budgets exceeding one billion Czech koruna. Excluding these projects, the estimated value would have increased by only 2%.

The report also highlights a decline in the number of initiated and completed residential units in August compared to the previous year. The number of units that began construction decreased by 23.1% to 3,102, while the number of completed units decreased by 21.8% to 2,792. This decline is particularly noticeable in Prague and the Central Bohemian Region, where developers continue to limit new projects, even in areas with long-standing housing supply shortages, which previously led to significant price increases.

The ongoing reduction in residential construction is expected to further limit the supply of new housing units and contribute to declining prices in the Czech real estate market. The slowdown in commercial property construction is likely to have a similar impact. Petr Dufek predicts an overall decline of around 2% in the construction industry for the entire year.

Article by Prague Forum