This report provides an overview of the construction works occurring in Romania through September 2013.

Romania’s construction works volume dropped by 6.7% y/y in Q2 and 5.8% y/y in H1 2013, with the civil engineering segment, expected to be the main growth driver, recording the steepest plunge in H1, namely minus 7.4% y/y. Construction works resumed an upward path in July, when they increased at a double-digit pace y/y, but this cheering performance is partly explained by a low base comparison: in July 2012 the construction works volume diminished abruptly after the local elections in June. Prior to the elections, the authorities rushed to spend the funds earmarked for infrastructure projects.

Accordingly, part of the poor sector performance in Q2 2013 is also explained by the high base comparison in the corresponding quarter last year. Compared to Q2 2011, the construction works volume in Q2 2013 actually increased by 2.3%. The sector outlook in the short run is rather pessimistic. Infrastructure investments, supposed to propel activity in constructions, have been cut down and the unblocking of major projects is uncertain. At the same time, investors’ confidence remains at a low level, which is reflected in the lack of new projects in the buildings construction segment.

Key Points:

• The real estate market seems to have stabilized in both the residential and commercial segments. Residential real estate prices further eased their annual decline in Q1 2013, when the lowest y/y decline was recorded in the past three years. Apartment prices remained on a downward path, but house prices actually increased by 3.3% y/y over the quarter, having risen by 8.2% y/y in Q4 2012.

• Retail remains the most dynamic segment in terms of transactions and new developments. Albeit focusing on smaller projects, mostly financed through their own resources, shopping center owners are moving on with new developments.

• Bucharest currently accounts for some 30% of the country’s modern retail stock; the capital city remains highly attractive for retailers, to the detriment of other cities with low modern retail penetration.