The construction sector in Romania reached record levels in 2023 and 2024, supported by strong private demand for certain real estate segments and a significant increase in public investments, from major infrastructure projects to hospitals, financed through national and European funds, shows a specialized analysis, published on Wednesday.
In the medium run, future changes to the tax regime for construction workers, together with the wider fiscal adjustments in Romania, could create difficulties, shows the Colliers market report on the development of the real estate market in the first six months of the year.
In addition, Romania's delays in implementing the necessary reforms to ensure continuous access to European funds could generate additional challenges.
"In the last two years, the construction market has seen both an increase in the nominal value and an expansion in the volume of works. This evolution has generated challenges for developers trying to launch new real estate projects. This situation was mostly influenced by the significant increase in total construction costs, caused by rising prices of raw materials, which, however, appear to be stabilizing now," said Silviu Pop, CEE&Romania Research Director at Colliers.
Given the difficult labour market context, construction prices started to rise again in 2024, reaching an annual rate of around 12% in May 2024 (the most recent month available), after a period of stabilization in the first half of last year. One of the main factors that determine this increase is the cost of labour.
While the prices of raw materials have stabilized, the Colliers consultants point out, employee expenses continue to rise. The number of workers in the construction sector reached a record level in May 2024, with almost 453,000 employees, registering a modest increase of 1% compared to the previous year, but a significant advance of 15% compared to the pre-pandemic period.
A key factor that supported the growth of the construction market at record levels was the increase in public investments, financed by both national and European funds. In the highway sector, Romania currently has approximately 800 kilometres of high-speed roads under construction, compared to an existing network of 1,100 kilometres. Also, hundreds of other highway sections are in various stages of preparation, some of which are already in the bidding phase. The major investments are not only limited to the road infrastructure, but also the modernisation of the railways is underway and the construction of several important regional hospitals, which is underway.
Colliers notes that the Government has spent over 11 billion euros on EU-backed capital projects in the first half of 2024, which represents around 3.3% of GDP. By comparison, in the same period of 2019, government spending on investments was 3.5 billion euros, or approximately 1.6% of GDP. This increase in public investments contributed significantly to maintaining a high level of activity in the construction sector.