Slide 1: Veidekke's Economic Activity Report March 2017
VEIDEKKE'S ECONOMIC ACTIVITY REPORT MARCH 2017 13 March 2017 Kristoffer Eide Hoen Director of Analysis
Slide 2: Summary
SUMMARY Strong Scandinavian construction and civil engineering market in 2016 Growth will continue in 2017 but level off towards 2018 Much depends on the residential market 2 Veidekke's Economic Activity Report March 2017
Slide 3: How Veidekke compiles the report
HOW VEIDEKKE COMPILES THE REPORT: Provide forecasts for investments / turnover in construction this year and next year • Reflections on market forces and uncertainties Macroeconomic forecasts from the consensus in recognised economic analysis institutions: • The IMF, the Swedish National Institute o
Slide 4: Forecasts for the market in 2017 and 2018
FORECASTS FOR "THE MARKET" IN 2017 AND 2018 Macroeconomic drivers Investment decisions Construction market 4 Veidekke's Economic Activity Report March 2017
Slide 5: Forecasts for the market in 2017 and 2018
FORECASTS FOR "THE MARKET" IN 2017 AND 2018 Indicators: GDP, interest rates, labour Investments/turnover in Start-ups, sales, orders market construction 5 Veidekke's Economic Activity Report March 2017
Slide 6: Forecasts for the market in 2017 and 2018
FORECASTS FOR "THE MARKET" IN 2017 AND 2018 Indicators: GDP, interest rates, labour Start-ups, sales, orders 2017 2018 market * Degree of visibility/predictability as per March 2017 6 Veidekke's Economic Activity Report March 2017
Slide 7: Contents
CONTENTS Macroeconomic drivers Forecasts for 2017 and 2018 Key market areas 7 Veidekke's Economic Activity Report March 2017
Slide 8: International economy
INTERNATIONAL ECONOMY GDP growth Stable forecasts in the international economy Source: IMF 8 Veidekke's Economic Activity Report March 2017
Slide 9: Veidekke's Economic Activity Report March 2017
9 Veidekke's Economic Activity Report March 2017
Slide 10: Is he driving long-term rates higher?
IS HE DRIVING LONG-TERM RATES HIGHER? Government Bonds 10-year Yield in % 3 Financial plans that drives inflation? • Expansionary policy - infrastructure and 2 tax cuts • Or is it a risk premium? 1 0 Jan. Jul. Nov. Jan. 2016 2016 2016 2017 US Euro zone Kilde: ECB og Federal Reserve 10 Veidekke's Eco
Slide 11: International economy
INTERNASJONAL ECONOMY Net inward migration from Baltikum and Poland Stronger economic conditions in the Baltics and Poland • The influx of labor has turned • Net emigration from Norway in Autumn 2016 11 Veidekke's Economic Activity Report March 2017
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Slide 13: Economic growth: Sweden in the driving seat
ECONOMIC GROWTH: SWEDEN IN THE DRIVING SEAT GDP growth Norway, % GDP growth Sweden, % GDP growth Denmark, % Norway: economic downturn entire 2018 Sweden: Strong economic expansion as Denmark: GDP figures continue to disappoint - Growth appears to have bottomed out predicted - Improvement predicted,
Slide 14: Labour market: some improvement in Norway, strong in Sweden and Denmark
LABOUR MARKET: SOME IMPROVEMENT IN NORWAY, STRONG IN SWEDEN AND DENMARK Employment growth Norway,% Employment growth Sweden, % Employment growth Denmark, % Norway: some improvement ahead? Sweden: unwinding after high growth Denmark: surprisingly strong in 2016 - Employment is expected to pick up aga
Slide 15: Interest rates: have interest rates bottomed out?
INTEREST RATES: HAVE INTEREST RATES BOTTOMED OUT? Interest rates Norway, % Interest rates Sweden, % Interest rates Denmark, % Impact in autumn in the long-term rates A higher increase than expected could produce strong effects but it not very likely Source: Norges Bank, Danish National Bank, Riksban
Slide 16: Contents
CONTENTS Macroeconomic drivers Forecasts for 2017 and 2018 Key market areas 16 Veidekke's Economic Activity Report March 2017
Slide 17: Technical adjustment
TECHNICAL ADJUSTMENT The forecasts made now in value / current prices Better reflect the turnover in industry Rule of thumb: Approximately 1-3% higher than in forecasts with volume 17 Veidekke's Economic Activity Report March 2017
Slide 18: Scandinavian construction market continues to grow
SCANDINAVIAN CONSTRUCTION MARKET CONTINUES TO GROW Market growth in % (current prices) % change in total investments 10 8,7 9 8 7 6,3 6 5,8 6,2 Strong market, high growth in 2016 5 4,4 Somewhat lower growth expected in 2017 4 3 and 2018 2 1 0 Avg. 2010- 2015 2016 2017 2018 2014 18 Veidekke's Economi
Slide 19: Scandinavian construction market continues to grow
SCANDINAVIAN CONSTRUCTION MARKET CONTINUES TO GROW Market growth, contribution to growth 10 9 8 7 6 5 Residental investments is the main 4 contributor to growth 3 2 1 0 Avg. 2010- 2015 2016 2017 2018 2014 Residental Non-residental buildings Civil engineering 19 Veidekke's Economic Activity Report Ma
Slide 20: Forecasts for the construction market
FORECASTS FOR THE CONSTRUCTION MARKET INVESTMENTS* IN THE CONSTRUCTION. FORECASTS FOR 2017 AND 2018 Current 2016 NOK 2016 2017-2018 2016 SEK 2016 2017-2018 2016 DKK 2016 2017-2018 prices billions** Growth Ann. Growth billions** Growth Ann. Growth billions** Growth Ann. Growth Residental 139 11 % 5%
Slide 21: Market growth 2017 and 2018
MARKET GROWTH 2017 AND 2018 INVESTMENT/TURNOVER TRENDS IN 2017 AND 2018 The cities represent urban regions (Greater- Oslo, Greater-Stockholm etc.) 21 Veidekke's Economic Activity Report March 2017
Slide 22: Contents
CONTENTS Macroeconomic drivers Forecasts for 2017 and 2018 Key market areas 22 Veidekke's Economic Activity Report March 2017
Slide 23: 1. Residential
1. RESIDENTIAL RESIDENTIAL Investments in residential NOK billions – 2016 NOK up to and including 2016, current in 2017 and 2018 Historically high level of construction 200 +7%* • ~50% growth last five years in Norway 180 and Sweden 160 +5%* 140 Investment growth in 2017 is 120 100 +17%* predictable
Slide 24: 1. Residential: risk factors
1. RESIDENTIAL RESIDENTIAL Risk factors for the investments in 208: Investments / turnover in 2018 will largely be influenced by sales and housing-starts this year Risk factors: • Interest rates (and inflation) • Expectations and psychology • Regulations on credit • Supply side (new and exisiting) 2
Slide 25: Norway: flatter in both prices and startup
NORWAY: FLATTER IN BOTH PRICES AND STARTUP RESIDENTIAL Prices for apartments Fundamental drivers residential Observations 2016: Index Jan 2014=100 Figures for Oslo • Limited explanation of fundamental forces • An increased presence of "investment“ • Low supply of housing where demand was greatest *A
Slide 26: Norway: flatter in both prices and startup
NORWAY: FLATTER IN BOTH PRICES AND STARTUP RESIDENTIAL Prices for apartments Residential start-ups What to expect? Index 2014=100 No. of units • Stron growth in supply • Impact of recession • Impacts in the market for secundary homes; • Credit regulations • Already a tenant`s market *Annual growth f
Slide 27: Price growth and construction of apartments in Norway
PRICE GROWTH AND CONSTRUCTION OF RESIDENTIAL APARTMENTS IN NORWAY Building costs index – unit prices for labour and materials for construction of blocks of apartments Percentage change year-on-year 7,0 6,0 6,0 5,0 4,0 3,4 % 2,8 3,0 2,0 Apartments under 16,000 11,000 16,000 construction 1,0 0,0 2007
Slide 28: Growth in prices and costs for apartments in Oslo
GROWTH IN PRICES AND COSTS FOR APARTMENTS IN OSLO RESIDENTIAL Prices and costs for construction of new apartments Price per GIA-s* 70 000 +46% 60 000 50 000 Price sq.m. new appartment 40 000 +8% Veidekke calculated constr. cost per sq.m. 30 000 20 000 Sources: Veidekke and Econ Nye Boliger 28 * Data
Slide 29: Sweden: growth rate declines
SWEDEN: GROWTH RATE DELINES RESIDENTIAL House prices, appartments Swedbank's housing affordability Observations 2016: index ("Boindex") Price per sq. m. • Continued price hikes and good sales start • Boindex indicates a "pain threshold" for prices? Swedbank's housing affordability index ("Boindex"):
Slide 30: Sweden: growth in housing declines
SWEDEN: GROWTH IN HOUSING DECLINES RESIDENTIAL House prices, appartments Start-ups apartments and terraced What to expect: houses. Rolling 12 months Price per sq. m. • 50% growth in housing starts last year leads to 60% growth in investments 2017 • High price levels dampens sales pace of new project
Slide 31: 2. Non-residential buildings
2. NON-RESIDENTAL BUILDINGS NON-RESIDENTIAL Private non-residential buildings: Offices, wholesale and retail trade, industry and warehouses Public non-residential buildings: School, culture and recreation, nursing homes and hospitals 31 Veidekke's Economic Activity Report March 2017
Slide 32: Private non-residential
PRIVATE NON-RESIDENTIAL NON-RESIDENTIAL Investments in private non-residential buildings NOK billions – 2016 NOK up to and including 2016, current in 2017 and 2018 Weak trend continues 120 • The boom has given rise in Sweden +3%* 100 • But no «take of» like housing 80 • Restraint characterize compan
Slide 33: Denmark: turning point?
DENMARK: TURNING POINT? NON-RESIDENTIAL Sadolin & Albæk Market Barometer Growth from very low level Vacancy rates • Forecasted growth of 8% in 2017 Progsess in the macro economy • Employment growth • Consumption growth • Industrial production …But market is still held back by continued high vacancy
Slide 34: Public non-residential
PUBLIC NON RESIDENTIAL NON-RESIDENTIAL Investments in public non-residential buildings NOK billions – 2016 NOK up to and including 2016, current in 2017 and 2018 Strong trend: 50 +5%* • Sweden: schools, universities and hospitals 45 40 • Norway: schools and culture/sports +3%* 35 30 • Denmark: hospi
Slide 35: Public non-residential buildings: a wave of hospital construction
PUBLIC NON-RESIDENTIAL BUILDINGS: A WAVE NON-RESIDENTIAL OF HOSPITAL CONSTRUCTION Tables: Projects started up or ready for start-up 2017-2018 > NOK 1 billion Norway: starting to increase Sweden: strong growth Denmark: strong growth Started means that the project has started. There may still be a num
Slide 36: 3. Civil engineering
3. CIVIL ENGINEERING CIVIL ENGINEERING 36 Veidekke's Economic Activity Report March 2017
Slide 37: 3. Civil engineering
3. CIVIL ENGINEERING CIVIL ENGINEERING Investments in civil engineering NOK billions – 2016 NOK up to and including 2016, current in 2017 and 2018 Observations 2016: 90 +3%* • Growth, though weaker than expected 80 +5%* 70 • Continued growth in Sweden 60 Continued upturn in 2017 and 2018 50 40 -6%*
Slide 38: Civil engineering
CIVIL ENGINEERING ANLEGG Foto: Hallgeir Vågenes, VG
Slide 39: Civil engineering
CIVIL ENGINEERING ANLEGG At page 289… 39 Veidekke's Economic Activity Report March 2017
Slide 40: Tougher priorities?
TØFFERE PRIORITERINGER? CIVIL ENGINEERING ANLEGG Overskudd på statsbudsjettet % av BNP Fastlandet 1,5 1,0 0,5 0,0 -0,5 -1,0 Kilde: Statsbudsjettet for 2016
Slide 41: Norway: roads – more customers to consider than the central government
NORWAY: ROADS – MORE CUSTOMERS TO CIVIL ENGINEERING ANLEGG CONSIDER THAN THE CENTRAL GOVERNMENT Investments in roads by customer Current prices, NOK millions Transport investments to increase: • Significant investment in state-run but municipalities and counties more restrained • «Nye Veier» started
Slide 42: Norway: still upward
NORWAY: STILL UPWARD CIVIL ENGINEERING ANLEGG Investments in Civil Engineering NOK billions – 2016 NOK up to and including 2016, current in 2017 and 2018 2017 and 2018 provides market growth • Rise in all segments • Unlikely with equally strong growth going forward as we have put behind us * Annual
Slide 43: Civil engineering
CIVIL ENGINEERING Infrastrukturminister 43 Anna Johansson Veidekke's Economic Activity Report March 2017 Foto: Henrik Montgomery/TT
Slide 44: Sweden: civil towards new investment levels
SWEDEN: CIVIL TOWARDS NEW INVESTMENTS LEVELS CIVIL ENGINEERING Investments in Civil Engineering Observations from 2016: SEK billions – 2016 SEK up to and including 2016, current in 2017 and 2018 • Municipal infrastructure related to housing resulted in high growth in "other civil» • Power industry f
Slide 45: Sweden: civil towards new investment levels
SWEDEN: CIVIL TOWARDS NEW INVESTMENTS LEVELS CIVIL ENGINEERING Huge plans and projects Whats is the realities? 45 Veidekke's Economic Activity Report March 2017
Slide 46: Road construction: intensive competition
ROAD CONSTRUCTION: INTENSIVE COMPETITION CIVIL ENGINEERING Leminkäinen Finland Socitea Spanien Larger projects and new forms of AF Gruppen Norge Norge Obrascón Spanien contracts Aarslef Danmark Acciona Spanien Strong increase in the number of Implenia Tyskland Dragodos Spanien companies Hochtief Tys
Slide 47: Summary
NYTT BILDE SUMMARY
Slide 48: Summary
SUMMARY Strong Scandinavian construction and civil engineering market in 2016 Growth will continue in 2017 but level off towards 2018 Much depends on the residential market 48 Veidekke's Economic Activity Report March 2017
Slide 49: Appendix - Forecasts
APPENDIX - FORECASTS
Slide 50: Norway: forecasts – local currency
NORWAY: FORECASTS – LOCAL CURRENCY 50 Veidekke's Economic Activity Report March 2017
Slide 51: Sweden: forecasts – local currency
SWEDEN: FORECASTS – LOCAL CURRENCY 51 Veidekke's Economic Activity Report March 2017
Slide 52: Denmark: forecasts – local currency
DENMARK: FORECASTS – LOCAL CURRENCY 52 Veidekke's Economic Activity Report March 2017