Europe Biannual Construction Market Report 3Q/4Q 2024
Poland
Top opportunities:
Release of European Union funding: Up to €137 billion of funding has been unlocked, which will fund projects to help the Polish economy become more resilient, promote the use of green energy, and assist with digital transformation, among other objectives.
Lower interest rates: The residential sector will be booming after the lowering of interest rates and hence, mortgages (potential decrease of inflation). Residential developers applied for many building permits, so there is the expectation of increased construction activity as a result.
Top risks:
Weak construction activity: The slowing in construction activity seen at the beginning of 2024 is forecast to continue in the next period due to the end of company investment cycles and the transition period between the budget perspectives for EU cohesion funds.
High levels of restructuring proceedings: The construction industry ended last year with an increase in the number of restructuring proceedings by as much as 170%. The financial position of many construction companies has worsened, which will impact profit margins and other elements that might affect quality.
Increased labour costs: The minimum wage in Poland significantly increased in 2023 and will rise again in 2024 and 2025. Construction workers will earn more — after long strikes and failed mediation, the construction industry has made significant progress in collective labour agreement negotiations. Labour costs will increase, influencing construction costs, including for end-users (for example, the residential sector).
Local economic indicators
Gross domestic product (GDP)
Statistics Poland’s latest quarterly flash report for 1Q 2024 unveiled a seasonally adjusted year-over-year (YoY) GDP increase of 1.3% and a 0.5% increase when compared to the previous period, 4Q 2023. However, the construction industry’s gross value added (GVA) contracted by 8.0% and 5.7% over the same respective periods, diminishing its contribution to overall GDP from 6.0% in 4Q 2023 to 5.8% in 1Q 2024.
The Organisation for Economic Co-operation and Development (OECD) revised its 2024 GDP growth forecasts for Poland from 2.1% to 2.9%, with an anticipated further growth of 3.4% in 2025.
Inflation
Preliminary data from Statistics Poland indicates local inflation reached 2.5% in May, marking a 0.1% increase from the previous month. The main driving force behind this was a 6.2% increase in the price of services.
Eurostat's harmonised index of consumer prices (HICP) for June is pending, but May's figure confirms this trend with a figure of 2.8%. The OECD reduced its inflation forecast for 2024 from 4.7% to 3.9%; however, a rise to 4.5% in 2025 would move Poland away from the EU's inflation target of 2.0%.
Construction materials
In 2024, a significant decrease in the growth of construction materials prices compared to previous years has been noted. This decrease in the rate of price inflation has been due to the decline in construction activity during the first half of 2024, the number of new orders and the stabilisation of supply chains for production materials following the turbulence caused by the war in Ukraine.
While the increase in material prices is close to the level of inflation, an upward trend in labour wages has been observed in the market due to a minimum wage increase in 2023.
The Gleeds' materials price table below has been updated from previous reports:
Market outlook
In June, Poland's construction confidence indicator stood at -14.5, reflecting a continued steady improvement from its most recent low point of -20.0 in December 2023 and a 0.3-point improvement compared to May. This development was primarily driven by better figures for employment expectations and current overall order books, which now stand at -2.4 and -26.5, respectively, an improvement from their 2024 lows of -6.8 and -33.5.
Labour shortages remain the primary constraint on building activity in Poland, registering 73.6 in June and averaging 73.7 so far in 2024. Material and equipment shortages are also persistently high, with a June figure of 47.9, consistent with the 2024 average of 48.3. However, there has been a positive trend in price expectations over the next three months. June's figure of 14.2 shows significant improvement from the 2024 high of 26.3 in January, reflecting the improving inflationary situation. As we move into the warmer summer months, weather conditions have also significantly improved to 10.1 in June from 31.0 in January, which aligns with seasonal patterns.
As per assessments from experts in our local office, the Polish construction market witnessed increases ranging from 5% to 10% in tender prices during 2023, with a comparatively smaller figure of 4.5% predicted for 2024. While this is positive news, the Polish construction market is still expected to face challenges in 2024. However, with careful management and strategic planning, these challenges can be navigated effectively.
As always, Gleeds advises regular project budget updates that consider recent market pricing and local risk factors that may impact project programmes and costs. Undertaking risk analysis studies enables better evaluation and preparation of appropriate contingencies for your particular project conditions and risk exposure.
Nobu Hotel, Warsaw, Poland — Gleeds Project Management services.
