Quality of buildings is significantly declining, construction companies admit

Prague - The quality of construction work continues to decline. Most construction companies (60 percent) operating in the Czech market admit that they are building at what is referred to as the "safety price limit." This follows from a specialized analysis by CEEC Research and KPMG Czech Republic, which is available to CTK. The analysis includes the opinions of more than 100 directors of construction firms.
    A price is considered safe when the construction is completed in such a way that it is trouble-free by the time it is handed over to users. As many as 14 percent of the surveyed directors even revealed that their companies are building below the safety price limit. Only one in four companies states that it operates above this limit.
    "This is a long-term unsustainable problem that will lead to a chain collapse of a large number of construction companies. Only in this way will there be a reduction in construction capacity in the market, prices for construction work will rise, and those who survive will be able to implement a rehabilitation process for their companies," predicts the further development Marcel Soural, chairman of the board of the development company Trigema.
    Bankruptcies among first-tier builders have already manifested in the market. "Low-quality constructions are being delivered, construction companies are going bankrupt, qualified workers are leaving, in the best case to other industries, and in the worse case to unemployment offices. Investors have construction projects that have collapsed due to the failure of their suppliers," claims Aleš Ullmann, business director of PSG - International.
    However, this year is not expected to be an easy one for the construction industry, and company bankruptcies are expected to continue. "The current number of construction companies and the total volume of offered construction capacities in the market do not correspond to the demand for construction work. Currently, there are even more companies in the market than in 2008, when the sector was at its peak. This creates enormous pressure on prices. A reduction on the supply side is necessary; without it, the sector will not recover, and we will increasingly hear: a few more 'victories' like this and it will be our end," described the market situation Jiří Vacek, director of the analytical company CEEC Research.
    According to Pavel Kliment, a partner responsible for services for real estate and construction companies at KPMG Czech Republic, the offering of construction contracts at level or even below cost often correlates with the aim of maintaining or expanding a company's market share in the expectation that a future strong position will yield returns on this investment. "The problem arises if such an approach becomes long-term and contradicts the financial condition of the construction company. In the chain of construction firms, it is especially the subcontractors whose situation can become unmanageable due to too small financial reserves," warned Kliment.