The residential market, in decline

Residential projects seem to be on stand-by this year, a fact that can be felt in the activity of construction material producers in our country, who also faced a decrease in the volume of works in the residential area last year, but with a increase in the volume of works in the industrial construction area, said the participants in the first edition of the Forecast Brunch in the Construction Materials Industry.

According to the data presented, last year the area of residential construction experienced a 60% decrease compared to 2021, which is also recorded in the January 2024 versus January 2023 report, where the residential sector recorded a minus of 53.6%. A 20.7% decrease was also recorded in the area of new constructions, a fact also reflected by the 14.7% decrease in the total volume of construction works.

Entrepreneurs believe that the factors that influenced this decrease are inflation, the decrease in purchasing power and the increase in the prices of raw materials. The latter left its mark on the increase in the price of construction materials, even if, after experiencing two peaks during the pandemic and at the beginning of the war in Ukraine, it seems to have stabilized at 30%. Representatives of the building materials industry say that the increase in the cost of production has been faster than that of the selling price and that some of this increase has not been reflected in the selling price.

The manufacturers of construction materials showed that their activity is influenced by the price of raw materials and exemplified the evolution of the price of steel, which has been quite steep in recent years.

Under these conditions, most entrepreneurs and investors in the construction materials industry claim that 2024 will be a year of survival for companies in the market.

Cristian Găvan, general manager and founder of MAM Bricolaj stated: "We have to prepare a survival kit in the conditions in which some companies in Western Europe are closing down. With all the evolution of last year, we are happy that we ended 2023 flat compared to 2022. But we notice that people are careful about what they spend, and that's why I think we have to be careful about what we invest in."

Cosmin Răileanu, Chief Executive Officer (CEO) & Founder at Vindem-Ieftin.ro (Virtual Warehouse), said: "Budgets allocated to constructions are lower in 2024, and we see this from the average of orders which decreased from 12,000 lei to 9,000 lei and is continuously decreasing. The market goes to the area of modest constructions, or let's say «optimized». We feel, from the point of view of online sales, a very high demand from customers who renovate or do a work themselves and we hope for a better result than last year when we barely managed to reach some profit following some restructuring and recalibrations".

His colleague, Flavius Cazan, stated that all clients are much more attentive, they prospect the market and only then make the decision, and he showed that in the first quarter of 2024, the downward trend in the residential field continues, where the areas of some projects have been reduced construction.

Other problems faced by entrepreneurs in the construction materials industry are the lack of qualified labor, specialists, unfair competition from companies that do not comply with material standards, competition tolerated by state institutions, especially the State Construction Inspectorate, fiscal unpredictability and legislative unpredictability.

However, there are better situations, especially for newer companies in the building materials market.

Răzvan Anastasoaia, CEO of the KaminHorn company stated: "Last year we had a 20% decrease in the residential area influenced by the war in Ukraine, which led to an increase in the sale of wood-based heating equipment. The decline was steep in the second half of last year in the residential area, but in the third quarter orders increased in the industrial area, which put us in a flat area at the end of last year. This year we proposed a 20% increase and, at the end of the first quarter, we reached 15%".

From the analysis carried out and presented yesterday by those from Depozit Virtual (Vindem-Ieftin.ro), we noted that there is a positive trend among customers towards the purchase or construction of new, energy-efficient buildings, a trend also imposed by the implementation of the Green Deal.

In this sense, Claudiu Burtoiu, technical director at Sttage and Perfect Arrangement, stated that people are interested in energy efficient houses, built from CLT (wood) and is expecting an increase in demand this summer.