By KYIV. Dec 5 (Interfax-Ukraine) – The full-scale invasion has radically changed the geography and volume of the construction market; rapid construction technologies will be the most in demand at the renewal stage.
This opinion was expressed by Rauta director Andruy Ozeychuk in a commentary to Interfax-Ukraine.
The expert said that total losses amount to more than $150 billion, including the greatest damage suffered by the housing stock ($56 billion), infrastructure ($37 billion) and industry ($12 billion).
“Over two years of a full-scale invasion, about 15% of the production capacity of construction materials was destroyed. At the same time, the greatest losses were suffered by the segments of rolled metal and dry gypsum mixtures,” Ozeychuk said.
He recalled that in 2022 the volume of the Ukrainian construction market decreased almost threefold compared to 2021. This year there is a tendency to increase the consumption of construction products and services; based on the results of the year, the market is expected to grow by 25%.
“At the same time, the volume of the residential real estate market in hryvnia equivalent will remain at the level of last year, non-residential real estate will grow by 15%, and engineering structures will show an increase of 40%,” Ozeychuk says.
The structure of activity in the residential construction market has changed drastically. The front-line regions experienced the greatest drop in construction volumes to almost 90%, the central part saw a decrease of up to 70%, and in the west construction increased by 15%, which is associated with the relocation of businesses and internally displaced persons, as well as the active development of resort real estate in the Carpathians.
“The primary real estate market has reoriented mainly to the west of Ukraine. Developers in other regions are focused mainly on completing projects started before March 2022. So far, most investors are hesitant to start new construction projects and are taking a wait-and-see approach,” the expert said.
In the center, north and east of Ukraine, demand for services for the restoration of destroyed buildings and structures has increased. A business that has suffered destruction of real estate needs to reconstruct buildings to resume functioning.
The fastest growing segment of construction is the restoration of infrastructure, primarily bridges and social facilities, using budget and donor funds.
“In response to wartime threats, a new segment of the building structures market has emerged – modular reinforced concrete shelters designed to protect people during air raids and artillery shelling,” the expert says.
As for prices, since the beginning of the war, construction costs have increased by 53%, which has led to a similar increase in prices on the primary real estate market. The expert predicts a further increase in construction costs, which is caused by increased demand and inflation.
Logistics has changed significantly. Suppliers of construction materials that previously imported products from Russia and Belarus (glass, bitumen, rolled metal, cement, sandwich panels, etc.) are forced to reorient themselves to supplying goods from the EU countries and Turkey. Due to the closure of Ukrainian ports, the import of construction materials by sea (rolled metal, chemicals, finishing, etc.) became impossible.
“Today, the import of these materials into Ukraine occurs mainly through Romania, which has led to an increase in their cost. At the end of 2023, complications arose with the import of raw materials and supplies due to the blocking of checkpoints on the border with Ukraine by Polish and Slovak carriers. This also led to an increase prices and delivery times of imported construction materials,” Ozeychuk says.
Another problem of the market is personnel; during the full-scale invasion, the reduction in the working-age population of Ukraine amounted to about 35%.
“The mobilization and emigration of qualified specialists has led to a shortage of personnel in the construction industry, which is felt even against the backdrop of a significant decline in the market. In the future, this may lead to an increase in wages, which will additionally affect the growth of construction costs, but still will not solve the problem of a shortage of qualified personnel,” the expert says.
He predicts that due to the whole range of problems, rapid construction technologies that require a minimum number of workers will be in demand.
“For example, the construction of buildings from sandwich panels requires many times fewer specialists than when building from artificial materials,” Ozeychuk says.
In his opinion, the problem of personnel shortage in the active stage of recovery probably cannot be solved without labor migration of qualified personnel from the EU and blue-collar specialists from Asia.
Legislative changes in 2022-23 focus on improving the safety of people and improving the energy efficiency of buildings.
“The adoption of amendments to Law No. 2486-IX regulates the requirements for the construction of bomb shelters during the construction of new buildings. Also in State Construction Regulations V.2.6-31:2021, the requirements for the minimum permissible values of the reduced heat transfer resistance of building envelopes have changed, which have increased by an average of 28%,” the expert says.
In general, the expert noted the cautiously positive attitude of the majority of Ukrainian investors, who are preparing for restoration and are actively calculating the cost of construction, but are waiting for the end of hostilities to start new projects.
“International financial institutions plan to be involved in reconstruction and are gradually entering the Ukrainian market. The key criteria for financing post-war construction in Ukraine will be transparency and speed of project implementation, so international organizations are already beginning to establish partnerships with reliable Ukrainian builders,” he says. According to his observation, companies working with European materials and technologies are a priority, allowing them to create modern, architecturally attractive and energy-efficient buildings.
