BRICKS & MORTAR: CEE housing markets a mixed bag so far in 2010

By bne IntelliNews July 9, 2010

Nicholas Watson in Prague -

Halfway through 2010 and the housing markets of Central and Eastern Europe are proving something of a mixed bag: stabilisation and a little growth in some, further declines in others.

That's the prognosis of Wienerberger, the biggest maker of bricks in Central and Eastern Europe. "At the beginning of the year, it was difficult to predict, as some markets we thought we might see some stablisation and some we might see more declines," Wienerberger's CEO, Heimo Scheuch, tells bne. "And as we move through the year to the halfway point, I have been confirmed in my analysis."

Brick makers like Vienna-based Wienerberger are pretty good barometers of the health of residential property markets. For one thing, bricks are, by nature, a local product, with a maximum "shelf life" of about 200 kilometres, so they can tell you a lot about a particular market. Secondly, the brick maker's business responds relatively quickly to underlying changes in the housing market, as the only buffer between it and the consumer is the (usually small) inventory of bricks held by the distributor and builder. Thirdly, given that bricks are needed right at the beginning of the construction process, this part of the business offers good visibility of the property market three to six months ahead.

As such, Wienerberger has had a rather torrid time of it since the bottom fell out of the US sub-prime market, triggering the financial crisis in the autumn of 2008 and causing housing markets around the world to collapse. "We are a cyclical company being 80% exposed to the new residential housing market. This market has been in a deep depression for the last two years in all countries we are operating in, with the biggest declines in the US and UK, as well as declines in Eastern and Western Europe."

When Scheuch took over Wienerberger in June of last year, the company, which had been built up to take advantage of the rapid growth in housing markets around the world, was facing a critical financial situation: high debt levels, high leverage and rapidly declining cash flow. Scheuch moved quickly to fix the deteriorating balance sheet by carrying out a capital increase and lengthening the maturity of debt. "It was very important that we were put in a position to emerge as a stronger company coming out of the recession than we were when we entered it."

The company was under pressure on the capacity front, as the previous management had driven the company for growth by entering a lot of new markets. Facing a completely different housing market to the one that existed at the start of 2008, Scheuch had to adjust this capacity to meet the much-reduced demand via closures, layoffs and the mothballing of capacity.

The brick markets

With the worst of the crisis past and economies around the world recovering, Scheuch sees the company's capacity utilisation increasing to 60% this year, a significant improvement from the roughly 50% of last year.

Looking at this year, among the hardest hit of the 17 emerging European markets that Wienerberger operates in was Hungary, which Scheuch says saw a further decline in the housing market in the first half as its economy struggles to emerge from one of the region's deepest recessions. Scheuch also noted further falls in the Czech, Slovak, Romanian and Bulgarian markets.

Poland, the only EU country that posted positive growth in 2009, was the strongest performer in the first half, though a long, harsh winter followed by floods in May meant many working days were lost, so the market appeared weaker than it fundamentally was. "Poland was looking promising with the level of housing starts and permits, but it was difficult to keep the momentum going because we lost so many days of work time due to the strong winter in the first three months of the year and heavy rain and flooding in May. However, I still view Poland as one of our strongest markets in this region."

Over the mid term, Scheuch is optimistic about the region in general, and Poland and Romania in particular. He says that Romania didn't see the same kind of housing boom that many western countries did pre-crisis, so it hasn't yet reach the optimal house construction level relative to the number of inhabitants. A normal average for a country of 22m people would be 5-6 housing units per 1,000 inhabitants built per year. "I am looking at the figures and judging from them, there was no boom in Romania. During the peak period, 2.5 housing units were built per 1,000 inhabitants per year. By comparison Spain, which saw a real boom, built 17 housing units per 1,000 inhabitants per year," he says.

On the downside, the newer markets of emerging Europe will be constrained by the greater difficulty that people in these countries have in accessing financing for housing, especially given the lingering effects of the credit crunch. However, propelling the markets forward will be a general shift to quality housing and the EU's drive to make the bloc's housing more energy efficient. "The energy efficiency programme of the EU will play into our hands because our products are very energy efficient, so it will give our business some momentum."

Related Articles

Latvia’s Citadele Bank pulls IPO

bne IntelliNews - Latvia's Citadele Bank has postponed its initial public offering (IPO), citing “ongoing unfavourable market conditions”, the bank announced on November 11. The postponement ... more

BOOK REVIEW: “Europe’s Orphan” – how the euro became a scapegoat for policy ills

Kit Gillet in Bucharest - The euro, conceived as part of a grand and unifying vision for Europe, has, over the last few years, become tainted and often even blamed for the calamities that have ... more

Mystery Latvian linked to Scottish shell companies denies role in $1bn Moldova bank fraud

Graham Stack in Berlin - A Latvian financier linked to the mass production of Scottish shell companies has denied to bne IntelliNews any involvement in the $1bn Moldovan bank fraud that has caused ... more

Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

Thank you. Please complete your registration by confirming your email address. A confirmation email has been sent to the email address you provided.

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

If you have any questions please contact us at

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.