Building sector banks on “soft landing”

Tougher times lie ahead for the construction industry Keystone

Switzerland's construction boom appears to be heading for a slowdown following a seven per cent drop in building applications during the first six months of the year.

The Swiss Master Builders Association is counting on a “soft landing”, saying commercial and civil engineering projects should compensate for a decline in house building.

Figures published on Friday by the industry review “baublatt” showed that building applications were down by about seven per cent to 16,143 for the first six months of the year.

The number of permits issued by local authorities fell by just under eight per cent to 13,696 over the same period.

The dip, which signals a future decline in the construction industry’s fortunes, follows an excellent start to the year that saw first-quarter turnover jump almost 15 per cent to around SFr3.3 billion ($2.7 billion) compared with the same period in 2006.

“Because of the good weather conditions we had a very good start to the year and I think this dynamism will continue in 2007. But it will eventually lose a bit of speed and we are hoping for soft landing next year,” Martin Fehle, vice-director of the Master Builders Association, told swissinfo.

“Building applications are down but this is logical because they have been at such a high level in recent years and you cannot maintain that forever,” he added.

Economic forecast

The State Secretariat for Economic Affairs (Seco) reached similar conclusions in its latest forecast for the Swiss economy published last month.

It noted that investment in house building was due to decline in many Organisation for Economic Cooperation and Development countries, including Switzerland.

“According to research by the KOF Swiss Economic Institute, the good health of the construction industry linked to the extremely mild winter must, however, be treated with caution,” noted Seco in its report.

“In fact the number of orders is unlikely to increase over the course of the coming months.”

The economic ministry also warned that the rise in long-term interest rates could also have a negative impact on the building sector, which employs 75,000-80,000 people.

But Fehle feels that the effect of a further 0.25 per cent hike would not have a significant effect on the number of building applications.

More trouble ahead?

In a separate development earlier this week, the construction industry saw another potential spanner thrown in the works when environmental groups launched an initiative calling for a freeze on building zones, amid fears over increasing urbanisation.

The environmental organisation Pro Natura Switzerland, one of those behind the campaign, claims that every second, a square metre of land disappears under concrete and asphalt.

The Master Builders Association said on Friday that it was worried about the development, fearing a slump in orders.

swissinfo, Adam Beaumont

In brief

According to the Swiss Master Builders Association, turnover in the construction sector increased by 3.3% to SFr16.3 billion last year.

Civil engineering works, boosted by the multi-billion franc NRLA project (Lötschberg, Gotthard and Ceneri rail tunnels), accounted for 45% of turnover.

Key facts

Building applications fell 6.9% during the first six months of the year.
In June they dipped 14.2% compared with a year ago.
Building permits dropped 7.8% during the first six months of the year.
These were down 12.8% in June compared with a year ago.