On the prospects of the construction sector from the crisis and real estate development in Ukraine

16.12.2010 14:09
Real Estate Market Analysis | On the prospects of the construction sector from the crisis and real estate development in Ukraine The construction industry remains unattractive for foreign direct investment.

If you follow the dynamics of the global economy in the sectoral division for the past two decades, it appears that during this time, the volume of global foreign direct investments increased 8-fold - from $ 1.9 trillion. in 1990 to $ 15.7 trillion. in 2007.

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Nevertheless, international investment capital over the past two decades has been very poorly represented in construction. So by 2007 from nearly $ 16 trillion. global FDI, foreign investors have invested in construction projects total $ 135.81 billion, or 0.9% of the total volume of investment funds, where the CIS countries of that amount was directed at least $ 5 billion

Since 2008 and till today there is a substantial decline in investor activity in the area of M & A transactions in the construction sector in the European Region. If the 2 quarter of 2007, the amount of announced M & A transactions in the construction sector amounted to 22 billion euros, in the 2 quarter of 2010 it was around 300 million euros.

Most likely in post-crisis period private foreign investors will be fairly conservative approach to investing in the construction segment, as the country, economic and investment risks are high, and long-term return on invested capital is much lower than in other sectors of the economy (particularly in the trade or the provision of financial and business services).

Predicted low investment activity in the construction sector is confirmed by recent studies of potential M & A among the economic sectors in the European Region. Most active in implementing the M & A transactions in Europe will show the telecommunications sector, industry (in particular, the chemical industry) and the consumer sector, and energy. At the same time, construction and real estate sectors show relatively low interest from the side of investors.

Priority in construction and real estate sectors for investment will be the countries of Central and Eastern Europe, the United Kingdom and Ireland, Middle East and North Africa.

Alex Oleynikov, InVenture
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