Construction index: positive outlook for 2017

In the first quarter of 2017, the construction index stood at a high 144 points. The expected seasonally adjusted sales of the main construction industry for the beginning of the year are thus in line with the previous quarter. While building construction is expected to increase again (+4%), the civil engineering index is somewhat behind the successful previous quarter (-3.4%).

Overall, the Swiss Association of Master Builders (SBC) expects a continuation of the successful trend in the current year, which will be increasingly driven by building construction. According to the SBC, rental housing construction is likely to play a decisive role in this.

At 121 points, the building construction index in the first quarter of 2017 is around eleven percent higher than in the same quarter of the previous year. Adjusted for seasonal and working-day effects, SBC expects a significant increase in sales in residential construction (+6.7%), while commercial construction is not expected to quite reach the level of the previous quarter (-2.2%). Overall, building construction sales in 2017 should once again increase compared to the previous year and be similar to the record year of 2014, forecasts the SBC. According to building applications, building construction projects worth CHF 48.6 billion were submitted in 2016. This is the highest figure since 2013, when the second-home initiative was adopted.

Construction boom: a double-edged sword

The run on real estate investments, which are attractive in the prevailing negative interest rate environment, is likely to translate into a record number of residential units produced, the association predicts. In the longer term, however, this construction boom is a double-edged sword: The high turnover in building construction driven by the low interest rate environment has, to a certain extent, an advance character. This will disappear as soon as real estate becomes less attractive for investors than other asset classes, for example due to an increase in interest rates, writes the SBC in a press release. The advance sales of new construction will weigh on incoming orders until the oversupply on the user markets is reduced again.

The Swiss Construction Index is published jointly by Credit Suisse and SBC on a quarterly basis. It serves as an early indicator of construction activity in Switzerland by forecasting sales in the main construction sector for the current quarter. The indicator is calculated by Credit Suisse Economic Research and is based mainly on the quarterly survey conducted by the SBC among its members. Additional data comes from the Federal Statistical Office and Baublatt.