Construction has recorded the highest growth of all economic sectors but signs of a slowdown are increasingly noticeable.

In the first half of 2008 construction was growing at a faster pace than other economic sectors, growth in construction prices was slowing, the increase in wages was higher than in other sectors, recruitment problems were diminishing and growth in building materials sales was slowing.
After the first six months of the year, projections for construction were better than at the beginning of the year. The increasingly high growth figures permitted cautious optimism. In June the value of output was by 21% higher year on year. But in the next months this favourable trend came to a halt and worrisome signs started to emerge: construction output was increasing at a slower pace, and companies reported a deterioration in economic conditions. In November construction companies reported a major drop in orders.
In the first half of 2008 all groups of construction companies recorded a rise in output but in the third quarter and in October construction activity slowed.
In 2007 around 133,000 homes were completed and home permits and starts were on the increase. This trend was expected to continue and 2008 was projected to be a record year in terms of home completions. In January-October 2008 the number of newly completed homes reached 122,000, 18.7% more than in the corresponding period of last year, but signals have emerged indicating a downturn on the housing market, especially the developers’ market. Home sales have collapsed. Banks have adopted stricter lending criteria, developers are stopping projects already started and investors do not have money to start new projects. Home permits and starts are on the decrease. Despite these problems, wage growth in construction is still very high, the highest of all sectors of the economy. In 2007-2008 average wages in construction grew by 15% or more annually.
According to experts, in coming quarters construction will remain the sector recording the highest growth but the huge tasks it faces will not be carried out by the deadlines planned. The tasks include the construction of roads and motorways, projects related to the Euro 2012 football tournament, and the Infrastructure and Environment Programme partially funded from EU sources. In the 10 months to October 2008 the construction growth rate was 14.4% and there is a slim chance for a sharp acceleration in construction activity in coming months.
Although construction companies are ready to carry out more projects, there are problems with organisational work due to a lack of local development plans, problems with the purchase of land for development and long tendering processes. These problems are exacerbated by the crisis on financial markets and reduced foreign investment.

Business climate in construction

In November the general economic climate in construction was at the lowest level since March 2006. Construction companies were less optimistic about demand and production. In November companies suffered from competition from other companies and insufficient demand more than in previous months while constraints created by costs of materials and a shortage of skilled workers diminished. Skill shortages are now becoming less of a problem because of rising wages and smaller workloads in construction, and returns of labour migrants to Poland.
In November 4.3% of the surveyed companies reported no barriers to their construction and assembly operations. The barrier created by competition from other companies was indicated by 60% of construction companies against 49% in November 2007. The second most serious barrier was labour costs. Compared to November last year, the barrier created by insufficient demand increased the most: from 15% to 26%.