Activity increases in the construction sector, but the price of costs skyrockets.

Construction activity in Spain grew again in the second quarter of 2021, registering its best production data in the private residential sector, according to the second 'Construction Diagnostic Report', prepared jointly by the Royal Institution of Chartered Surveyors (RICS), an international organization that represents real estate professionals, and the General Council of Technical Architecture of Spain (CGATE).

The report reflects the first increase in activity since before the pandemic, with an increase in the Construction Activity Index in Spain that stands at +17 in the second quarter, from -11 marked in the first quarter of the year. Compared to the previous year, the increase in activity is even more evident. At this point in 2020, the Spanish construction index reflected -37. Spain follows a similar trajectory to the rest of Europe, although it continues behind the global European figures.

The sector's activity in the non-residential market is also recovering, although the pace is somewhat slower. In the second quarter of the year there was an activity rate of + 23% compared to -19% in the previous quarter.

For the civil works and infrastructure sector, the results are consistent, although with a more modest increase (a net balance of + 11%). However, the outlook is much better for the digital and energy sectors (+ 41% and + 44% respectively).

Looking ahead to the next few months, the works portfolio forecasts suggest that the ongoing recovery will continue to gain ground during the second half of this year and into 2022. The momentum in all three sectors is solid, with expectations that the private residential sector continue to lead (net balance + 46%) followed by non-residential private companies (net balance + 28%) and infrastructure (+ 19%).

"The rebound in activity in the construction sector continues to gain ground with a strong housing market playing a key role. In addition, the interest rate outlook indicates that the housing market will continue to be key to the recovery. economy of the country, ”says Simon Rubinsohn, chief economist at RICS.

Forecasts managed by RICS and CGATE suggest that infrastructure will play an increasingly important role in most European countries as government programs to rebuild the economy after the pandemic begin to be implemented effectively.

"As in other parts of the world, the industry, unsurprisingly, faces significant challenges, as it seeks to increase activity despite obstacles such as material and labor shortages that anticipate further cost increases" , they point out from RICS. In this context, the expected recovery in profitability is likely to be delayed somewhat more over time.

"The construction sector evolves favorably despite the first effects of the economic recession due to covid-19. Once this circumstance has been overcome, new potholes have emerged that we hope will be overcome during the second semester: the shortage of labor trained and the high cost of raw materials. This report, which includes the positions of Technical Architects and other real estate professions, perfectly reflects this uncertainty that now worries the sector ", says Alfredo Sanz, president of CGATE