Slide 1: Market update autumn 2023
28 September 2023 Kristoffer Eide Hoen | Head of Business Development and Analysis Questions? kristoffer.eide.hoen@veidekke.no
Slide 2: About Veidekke's market report
About Veidekke’s market report • Veidekke prepares figures for the Scandinavian markets based on statistics published by Statistics Norway (SSB), Statistics Sweden (SCB) and Statistics Denmark (DST). Other information sources include major construction clients like the Swedish Transport Administrati
Slide 3: Our focus: the Scandinavian construction markets
Our focus: the Scandinavian construction markets Not included: - Detached houses and holiday homes - Primary industry The construction markets in 2022 - Residential refurbishment, work performed Production of buildings* and infrastructure in NOK billion “off-the-books” and household DIY Total Scandi
Slide 4: Construction markets: Forecasts 2023-2025
Construction markets Forecasts 2023–2025 Comment Production in the Scandinavian construction markets • A 6% drop in 2023 will reverse last year’s strong growth of 15%. In Norway, Percentage change since previous year, current prices growth is also expected to be weak this year, while the Swedish and
Slide 5: Agenda
Agenda 01 Introduction 02 Economic environment 03 The construction markets 04 Construction costs 05 Summary 5
Slide 6: Introduction
01 Introduction
Slide 7: Geopolitical turbulence lessens
Geopolitical turbulence lessens Geopolitical turbulence and risk premiums on European corporate bonds Comment 350 Geopolitical risk (GPR index) Risk premium on European corporate bonds • Geopolitical risk indicators, which quantify the risk Average 2010–present of international conflict, have return
Slide 8: Economic environment
02 Economic environment - Growth and the labour market - Inflation and interest rates - Demographic factors
Slide 9: Less severe economic fluctuations, as planned
Less severe economic fluctuations, as planned Economic growth in Scandinavia and selected countries Comment 2020 2021 2022 2023 2024 2025 • Global economic growth is expected to remain moderate, 8 with a resulting negative impact on Scandinavian export markets. 5.7 6 5.2 4.9 4.9 • Leading GDP foreca
Slide 10: Labour markets remain strong
Labour markets remain strong Still few indications of material increases in unemployment • Low unemployment equates to a lower risk of material 16 demand disruption in private segments such as residential units and commercial buildings. 14 • To date, higher interest rates and weaker economic develop
Slide 11: Inflation and CPI are falling, but it is taking time
Inflation and CPI are falling, but it is taking time Forecasts indicate a downward trend • Inflation has remained high in 2023 but is expected to fall 2020 2021 2022 2023 2024 2025 during the year and to reach central-bank target levels in most countries in 2024. 9 8.5 8.4 • In Norway, inflation is
Slide 12: Rising market interest rates?
Rising market interest rates? Market interest rates have risen again, but risk premiums are stable 10-year government bond rate • Market interest rates have risen in recent quarters. 5 In Norway and Sweden, long interest rates have increased by approximately 0.5 to 1 percentage points since the prev
Slide 13: The construction markets
O03 The construction markets VEIDEKKE
Slide 14: Estimated order intake, construction operation
Estimated order intake, construction operation Stable order intake among major listed companies Order intake, Nordic construction operations Estimated order intake, Scandinavian construction projects Reporting companies, inflation-adjusted estimates in NOK billion Inflation-adjusted and in NOK billi
Slide 15: Estimated order intake, construction operation
Estimated order intake, construction operation Stable order intake among major listed companies Order intake, Nordic construction operations Estimated order intake, Scandinavian construction projects Reporting companies, inflation-adjusted estimates in NOK billion Inflation-adjusted and in NOK billi
Slide 16: The Scandinavian construction markets, current prices
The Scandinavian construction markets Historical figures and forecasts, current prices Norway, production by sector Sweden, production by sector Denmark, production by sector NOK billion, current prices NOK billion, current prices NOK billion, current prices 160 180 180 CAGR 2023–2025 CAGR 2023–2025
Slide 17: The Scandinavian construction markets, fixed prices
The Scandinavian construction markets Historical figures and forecasts, fixed prices Norway, production by sector Sweden, production by sector Denmark, production by sector NOK billion, fixed prices NOK billion, fixed prices NOK billion, fixed prices 180 180 180 CAGR 2023–2025 CAGR 2023–2025 CAGR 20
Slide 18: Construction
Construction VEIDEKKE
Slide 19: Recent stabilisation in the secondhand residential market
Recent stabilisation in the secondhand residential market Residential prices, index Comment Prices, secondhand residential units in Scandinavia, apartments • Residential prices in Norway have remained Index: January 2020 = 100 relatively flat following last year’s slight drop. 125 • In Sweden, this
Slide 20: Apartments and small houses, Norway and Sweden
Apartments and small houses, Norway and Sweden Estimated value of order intake up to and including Q2 2023 Comment Norway, estimated order intake Sweden, estimated order intake • In Norway, the number of building starts involving NOK billion NOK billion apartments and small houses was satisfactory,
Slide 21: New residential unit sales in Norway
New residential unit sales in Norway Positive trend this spring following a powerful drop last autumn Comment Ready-for-sale and sold apartments New residential unit prices (apartments) • New apartment sales fell strongly in the second Number of units, 12-month rolling total and last two months Year
Slide 22: Commercial buildings in Norway and Sweden
Commercial buildings in Norway and Sweden Logistics and industrial operations are driving the sector Comment Norway, estimated order intake Sweden, estimated order intake • The commercial buildings segment has NOK billion NOK billion performed surprisingly well in recent years. Moreover, Sweden agai
Slide 23: Public buildings in Norway and Sweden
Public buildings in Norway and Sweden Weak during Covid-19 pandemic in Norway, more activity in Sweden Comment Norway, estimated order intake Sweden, estimated order intake • In value terms, building starts in the public NOK billion NOK billion buildings segment remained relatively stable in 2022. W
Slide 24: Infrastructure
Infrastructure VEIDEKKE
Slide 25: The civil engineering market in Norway and Sweden
The civil engineering market in Norway and Sweden The market remains strong Comment Norway, production Sweden, production • Strong growth in 2022 is primarily attributable to NOK billion, current prices NOK billion, current prices construction cost increases of 12–15%. More normal increases in both
Slide 26: Transport infrastructure in Norway
Transport infrastructure in Norway More roads, less rail Comment Roads market, production Railways market, production Roads NOK billion, current prices NOK billion, current prices • Further growth expected in 2024 and 2025. 60 4% 7% 14% 13% 4% -7% 3% 13% 0% 15% 9% 60 13% -12% 3% 3% 20% 5% 34% 18% -5
Slide 27: Transport infrastructure in Sweden
Transport infrastructure in Sweden Decline in 2024, weak growth anticipated in 2025 Comment Roads market, production Railways market, production Roads NOK billion, current prices NOK billion, current prices • Substantial drop in the past three years, measured by volume. 40 3% 13% 16% 12% 3% 16% -4%
Slide 28: Norway: energy, water supply and sewerage
Norway: energy, water supply and sewerage Further growth expected Comment Production Energy NOK billion, current prices • Volumes dropped in 2021 and 2022, primarily due to a slowdown 30 12% 13% 3% 19% 4% 8% -9% 12% 7% 8% 8% in the development of new power plants. • Energy investment is expected to
Slide 29: Sweden: energy, water supply and sewerage
Sweden: energy, water supply and sewerage Further growth expected Comment Production Energy NOK billion, current prices • Somewhat slower pace of wind power development towards the end 70 -3% -11% 13% 16% 21% 8% -10% 38% 8% 7% 4% of the forecast period, compared to earlier years. • As in Norway, the
Slide 30: Road maintenance, Norway
Road maintenance, Norway Prospect of high activity levels Comment Road maintenance Railway maintenance Roads NOK billion NOK billion • Three years of strong growth are behind us. 40 9% 4% 9% 1% 2% 15% 10% 8% 11% -3% 1% 40 3% 20% -12% 10% 8% 3% 1% -14% 3% 12% 15% • Activity is expected to flatten out
Slide 31: Norway: Asphalt
Norway: Asphalt Maintenance Comment Asphalting of existing road network • Central government budget allocations for the asphalting NOK million of national roads were cut by 27% from 2022 to 2023. 6 000 • During the same period, expenditure on the asphalting of county roads was cut by 13%. 5 000 • St
Slide 32: Construction costs
O04 Construction costs VEIDEKKE
Slide 33: Cost inflation set to fall
Cost inflation set to fall Construction cost indices show slower growth than last year Norway, Construction cost index, residential blocks Sweden, Construction cost index, residential block Comment* • Construction-cost inflation has fallen considerably Percentage change since same month last year Pe
Slide 34: Norway: Construction cost index, civil engineering
Norway: Construction cost index, civil engineering Prices are flattening out Comment* Construction cost index, roads (Norway) • Construction costs in the civil engineering and road maintenance segments Percentage change since same quarter last year increased strongly in 2022, driven not least by sub
Slide 35: Summary
05 Summary
Slide 36: Construction markets: Forecasts 2023-2025
Construction markets Forecasts 2023–2025 Comment Production in the Scandinavian construction markets • A 6% drop in 2023 will reverse last year’s strong growth of 15%. In Norway, Percentage change since previous year, current prices growth is also expected to be weak this year, while the Swedish and
Slide 37: EU Green Deal: Revision of the Energy Performance of Buildings Directive
EU Green Deal Revision of the Energy Performance of Buildings Directive (EPBD) 28 September 2023 Amna Rasool
Slide 38: The Energy Performance of Buildings Directive
The Energy Performance of Buildings Directive • The Energy Performance of Buildings Directive (EPBD) was first introduced in 2002, as the primary legislation regulating energy requirements for buildings across the EU. • In December 2021, the European Commission proposed a revision of the EPBD, as on
Slide 39: Summary of the proposals
Summary of the proposals Commission Council Parliament • Provided that the European Commission's proposal is adopted, (winter ‘21) (autumn ‘22) (spring ‘23) standardised energy efficiency certificates (EPC) A–G will be introduced in all EU countries. The 15% least energy-efficient buildings in each
Slide 40: Current situation
Current situation National energy efficiency certification, apartment buildings Scandinavia Norway, energy efficiency classification Sweden, energy efficiency classification Denmark, energy efficiency classification Number and percentage Number and percentage Number and percentage 9 000 60 000 30000
Slide 41: What could this imply for Scandinavia?
What could this imply for Scandinavia ? • Today, new buildings normally receive energy efficiency certificates of between A and C, while older, unrenovated buildings score at the bottom Norway Sweden Denmark of the scale. F* by 2030 • Assuming that buildings already labelled for energy efficiency ar
Slide 42: Thank you
Thank you for 4 2