The Dutch construction sector is expected to show a slight upturn from 2012. But companies will still struggle in a difficult market, according to ING economist Maurice van Santen in an interview with website NUzakelijk.

Several Dutch construction firms have presented their third quarter results already; others will follow suit this week. Heijmans showed higher profit margins with a lower turnover. Its financial director commented that the housing market has ‘touched bottom’.
BAM and Ballast Nedam weren’t as optimistic. BAM even issued a profit warning after facing a considerable write off due to another poor performance from its real estate division AM.
CBS figures out last Friday showed that production in the building sector was down 8 percent in the third quarter. The industrial sector, however, was up seven percent due to increased exports.
Bumper years
‘The building sector depends on investment and that has been slow in coming’, says Van Sante of the ING Economic Bureau. It is a ‘late cyclical sector’ which is lead by the state of the economy. ‘In 2009, when the recession hit, the building sector was still holding its own. The real damage wasn’t done until later.’
Industry is capable of a quick increase in production when the economy shows signs of recovery but building firms need more time. ‘They have to apply for building permission. It’s a long time before building itself can actually begin’, says van Sante.
ING expects the building sector as a whole to show ‘limited growth’ from 2012. By that the Economic Bureau means the average growth of 2 percent of the last twenty years. 2007 and 2008 were bumper years in the sector. The question is ‘if and when that level op production will be equalled again’.
Residential construction
According to the economist the building sector is divided into three main segments. The market for residential construction, which has come in for the worst punishment, shrank by 13 percent last year and will show an 11 percent drop again this year.
‘House sales are up. We expect this is to be an ongoing trend. Every year another 50,000 households need homes’, says Van Sante.

Low turnover

ING expects the market for newly built houses to stabilise in 2011 at 0 percent and then recuperate. ‘But in the short term we won’t come anywhere near to the levels of 2007 and 2008’, he warns.
Housing renovations – which account for half of the housing market – are ‘reasonably stable’. It saw some shrinkage in 2009 but ‘only’ 0.2 percent. This year the market looks to be stable and ING is forecasting an increase of around 1.5 percent.
‘In spite of this growth, turnovers remain low because production levels are down,’ Van Sante explains.
Offices
Many building firms are active in the office building market. It’s an awkward market, according to Van Sante, both in the short and the long term. ‘A lot of office buildings are standing empty already. Add to that a shrinking workforce and a growing trend to work from home and things look even worse.’
Van Sante thinks that when the economy recovers companies will begin by investing in new software, cars and office furniture before they tackle office space. ‘This delayed reaction means that 2011 will still show an 11 percent shrinkage.’
Maintenance contracts and sustainability projects offer some comfort, as they have in the housing market.
Roads
The third segment is road building. ‘On the one hand there are plenty of projects that could be tackled. The Netherlands needs protection from high water levels, for instance, and we have a huge traffic problem. On the other hand, the government is cutting down on spending.’
ING is expecting a shrinkage in infrastructure activity this year. Next year will show 0 growth and stabilisation. Van Sante: ‘In the long term much will depend on government policy since the government is the main employer in this field.’
This is an unofficial translation