Western Mainland Europe Construction Market Report 4Q 2023
Italy
Local economic indicators
The Italian National Institute of Statistics (Istat) reported on 1 December 2023 that the country achieved year-on-year growth (YoY) of 0.1% in 3Q 2023 and when compared to the previous quarter. The value added data (chain-linked; seasonally adjusted) showed construction grew 0.8% over the previous quarter and +1.3% YoY. The Organisation for Economic Co-operation and Development (OECD) updated its yearly GDP forecast to 0.7% in 2023 and 0.7% in 2024.
The most recent data from Istat reveals local inflation at 0.8% in November, a significant drop from September’s 5.3% and the lowest since July 2021 (1.9%). The Eurostat Harmonised Index of Consumer Prices (HICP) has produced similar results at 0.7% in November, the lowest since August 2021. The OECD adjusted its 2023 forecasts to 6.1% and 2.6% in 2024.
Construction materials
The local construction cost index reported by Istat shows continued stability, where pricing has increased less than 1% in residential and contracted over 4% in industrial construction. But not all costs can be based on these summarised figures. As reported by Eurostat, the local industrial producer price index reveals ongoing YoY price recovery in flat glass, clay building materials, hollow steel profiles and especially in electrical distribution items. In general, the volatility seen in 2022 has been replaced with recovery and stability. See the following table for month-over-month (MoM), YoY and indexed pricing inflation:
Market outlook
The construction confidence increased was calculated at 6.6 in November, due to positive work expectations (7.6) and current overall order books (5.5). Labour and materials shortages continue to limit building activity at 24.4 and 16.5, respectively. Employment rates improved in September by 2.2% YoY, and the unemployed retracted by 5.1% YoY, further supporting the concerns for labour availability.
Investments and activities remain active in both private and public works. Scenari Immobiliario, the local independent real estate research institute, published its 43rd edition of Real Estate Funds in Italy and Abroad on 22 November 2023. The institute highlights that Italy’s real estate values increased 3.2% YoY due to ongoing activity in asset management focusing on “quality, with targeted disposals, acquisitions and simplifications.”
Italy’s National Recovery and Resilience Plan (PNRR) set aside €960 million for reforms in student housing legislation and investments in student accommodation construction. The goal is to triple the available beds to over 100,000 units by 2026. Further to the PNRR goals, Aziendabanca reports a shortage of 130,000 beds in the country. Public funding falls short; meeting the overall needs will require private investment.
As always, Gleeds advises regular project budget updates that take into account recent market pricing and local risk factors which 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.
