Oxstones Investment Club™
As a result of the global financial crisis which hit the country in 2008, the construction industry suffered more than most areas of the Kazakh economy. Fortunately for builders, the government undertook several measures to support the industry which will positively influence the market in the coming years. Going forward, the market is expected to grow steadily reaching 3% real growth in 2013. Yet, the growth figures will be far below the stellar numbers seen in the times of the construction boom.
According to the research company PMR’s latest report, entitled “Construction sector in Kazakhstan 2012 – Development forecasts for 2012-2014”, for each area of the construction market a government programme has been rolled out to provide support. For example, the Forced Industrial-Innovative Development Programme, which envisaged the implementation of 469 projects between 2010 and 2014, will have an effect on both civil engineering and non-residential construction, depending on the nature of individual projects. In addition, there is an extensive Transport Infrastructure Development Programme for 2010-2014, which will continue to support civil engineering construction going forward, mostly through increases in the construction and renovation of roads. And the 2011-2014 Housing Construction Programme has recently been replaced with a new programme scheduled for the period through 2020, which will provide impetus for residential construction.
Having rolled out all these programmes, however, the government now seeks to reduce its presence on the market so that private developers and construction companies can become more active and assume dominance in Kazakh construction. The jury is still out, though, on whether the private sector is already strong enough to take the lead and ensure rapid development going forward.
Residential construction activity in Kazakhstan underwent a dramatic decline with the onset of the global financial crisis in 2008. It remained subdued until 2011 when the number of residential buildings completed grew by 7.5%. 2011 figure is, however, still just half the peak levels observed in 2007. The 2011 growth was driven partly by increased activity among individual investors and in part by the government’s heavy investment in the construction of residential buildings within the participatory housing construction scheme.
State support was beneficial for both sides. In the new market conditions, developers reoriented their development projects to economy class and successfully completed them with financial support from the state. Both sides benefited from this collaboration: the developers completed and passed the previously frozen projects, and the state received affordable housing.
The situation is currently rebalancing again, with state involvement decreasing. However, private development companies are not yet as strong as before the crisis and struggle with numerous problems. Individual builders are relatively more active and their share of total housing construction is on the rise. Last year, individual builders accounted for 55% of all housing space completed and this grew at a pace of 20% over 2010. This was related to better access to loans for house-building purposes. In 2012 the increase in value of mortgages issued by Kazakhstan’s banks may reach 20-30%. However, the Kazakh mortgage market is still not near the level reached in 2007, when the total value of new mortgage loans granted to aspiring homeowners reached KZT 417.5bn ($2.9bn).
This press release is based on information contained in the latest PMR report entitled “Construction sector in Kazakhstan 2012 − Development forecasts for 2012-2014”.
For more information on the report please contact:
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Tags: construction industry, construction sector, Global Financial Crisis, government, Kazakh economy, mortgage loans, private developers, residential construction, state support