Greece faces one more decline in construction output

Construction and engineering professions have suffered massively during the economic crisis since 2010. A sharp decline in construction output has pushed many companies to bankruptcy or big cuts in workforce, to survive in a stagnated economic environment.

Data from the 3rd trimester of 2016 has again showed that construction industry is weak and it struggles to change to an uptrend direction. According to reported data announced from the Greek Statistics Agency the ‘construction output index’ for Greece, has declined by 9.3% for the 1st semester of 2016, compared to the 1st semester of 2015. Construction output has been declining since 2010 and struggles to stabilize. The continuous decline has affected the cost of construction projects.

Hence there was one more decline at the second trimester for the ‘new building construction cost index’ by 1.8% compared to the same period in 2015. The reduction of this index, which measures the cost that a property developer will be burdened to construct a new building, has not yet encouraged development companies to accelerate investment activity. This downtrend is strengthened by the reported monthly decline in material prices of 1,9% for June 2016 compared to the same month of 2015. Furthermore, cost of building services, which is consisted of workmanship, subcontractor services etc excluding material costs, has slightly advanced by 0.2%for the same period.

Nevertheless, even though Greece’s output has declined sharply, Crete’s construction activity has been less vulnerable according to the Greek Statistics Agency. The report published in May 2016 for the annual construction activity in Greece, showed that Crete’s domestic construction activity data, reported a decline of 1.3%, compared to Greece’s average of 9.7% for the period of May 2015 to May 2016 compared to the same period of May 2014 to May 2015.

This was the best result among 13 divided regions of Greece. We believe that Crete’s diversed economic model, which compines earnings from tourism, services and agriclultural sectors has minimized the effect to local construction industry. Short term data shows that Crete’s domestic construction activity for the period 2016-2017 will be sustained at the same levels, with no major declines, due to positive upcoming investments in the tourism industry. Tourism data in 2016 shows another good year for Crete, despite the negative international news.