THE IMPACT OF THE ECONOMIC CRISIS IN THE DEVELOPED COUNTRIES ON THE REAL ESTATE MARKET AND PUBLIC SECTOR IN THE TRANSITION ECONOMIES – A BELARUSIAN AND LUTHIANIAN CASE STUDY Authors: Dr. Nikolai Siniak Associate professor, Chairman of of the economy and management of enterprises department, Belarusian State Technological University, Member of gif German Society of Property Researchers Address: Belarusian State Technological University Economy and management of enterprises department 220006 Minsk, Sverdlov St., 13a, Republic of Belarus Telephone: (0375) 017 2277117, Mob.: (0375) 29 5674132, Fax: (0375) 017 2276217 www.bstu.unibel.by E-mail:
[email protected],
[email protected]
Dr. Uladzimir Valetka Associate professor, Economy and management of enterprises department, Belarusian State Technological University Address: Belarusian State Technological University Economy and management of enterprises department 220006 Minsk, Sverdlov St., 13a, Republic of Belarus Telephone: (0375) 017 2277117, Mob.: (0375) 29 6243020, Fax: (0375) 017 2276217 www.bstu.unibel.by E-mail:
[email protected]
Leonid Rusiyanov Institute of Real Estate and Valuation, Director Address: 11, Komsomolskaya St., Minsk Tel/ Fax: (0375) 017 2275121
[email protected]
Prof. PhD. DrSc. Arturas Kaklauskas Chairman of the Department of Construction Economics and Property Management, Vice-director of the Institute of Internet and Intelligent Technologies, Member Expert of the Lithuanian Academy of Science, Vilnius Gediminas Technical University, Sauletekio al. 11, LT-10223 Vilnius, Lithuania,
[email protected]
“Paper presented at the 16th European Real Estate Society Conference”, Stockholm, 24-27, June, 2009
Keywords: Real estate market, economic recession, analysis, forecast, macroeconomic factors, prices
Abstract This paper attempts to identify some aspects of the relationship between the crisis, real estate market and public services. It is known that the difficulties of construction and real estate in the early 1990s were largely responsible for a decade of low growth. And yet, few in academia seem to care much about the construction sector and real estate. Paper distinguishes three aspects of the economic crisis – the banking crisis, the credit squeeze, and the recession – and their different effects on high income countries and developing countries, and on the real estate, some public and private sectors. It is examined the behavior of American and European real estate markets after the mortgage crisis in comparison with transition countries real estate markets, with an emphasis on Belarus and Russia. A number of hypotheses about the relative performance of the CEE countries relative to their western counterparts are investigated. The questions addressed are the ways construction firms cope with the volatility of construction, the speculative or market fundamentals driven nature of those fluctuations. We also try to make clear if state and local regulation is responsible for speculative behavior and find better ways to predict construction demand and development of real estate markets. Predicting the development of real estate markets has always been a major concern for market participants, especially for investors. The amount and depth of data about a subject market as well as the stability of the market's institutional environment largely impact the quality of market forecasts. Therefore, the prediction of emerging real estate markets is especially difficult. Using the case of Belarus, this paper explores to which extent economic-mathematical techniques can be helpful in the context of predicting the development of an emerging real estate market. Statistical and econometric techniques are employed to find the drivers that influence the major housing market and its development in future. A variety of different factors is examined in the time period 1992 to 2008 based on the macroeconomic multifactor model. We analyze the relation between incomes, gross domestic product, investment, R&D expenditure and real estate prices. Econometric input-output analysis as a primary technique for understanding the aggregated relationship between the construction sector and the various sectors that are linked with it either upstream or downstream in the productive chain is applied to evaluate the potential of Housing Construction doubling to 2011 in Belarus to overcome economic recession. It then also examines: - the pattern of government responses, and the impact on real estate market, public sector and public spending; - the implications for some selected public services; - the effects on the private companies involved in public sector contracts, and - some discussion of the role of the state in the Times of Financial crises.
1. Identification of global development trends The research helped to determine various global development trends related to construction and real estate crisis management. They include economic, political, legal/regulatory, technological, technical, organisational, managerial, institutional, social, cultural, ethical, psychological, educational, environmental and confidence aspects. Some of them are review below. The investigation carried out by the authors of this paper helped to identify and describe major trends of sustainable construction and real estate crisis management in industrialized countries as well as providing recommendations for Lithuania’s development. The comparative quantitative and conceptual analysis of crisis management carried out in developed countries and in Lithuania allowed the authors to identify areas where the situation in Lithuania is comparable, partly comparable with or quite different from the levels attained by the foreign developed countries. The data from this quantitative and conceptual analysis were used in identifying crisis management trends in Western Europe and the USA as well as providing some recommendations for Lithuania. Micro, meso and macro environments have a direct impact on crisis management opportunities. This may facilitate sustainable crisis management or, on the contrary, may create constraints. Until recently, researchers were unable to reach a unanimous conclusion as to the structure of factors of micro, meso and macro environments and therefore several variations can be found in articles and books on this subject. European construction krizės macro and micro-economic effects (Detemmerman, 2009): o Macro-economic effects: - The situation varies significantly from country to country (initial market state and long term trends, real estate market corrections, effects of the financial crisis, effects of the overall recession, effectiveness of governmental recovery measures). - Economic downturn has a delayed impact on the construction sector. - Redundancies. - Negative impact on the "sustainability" trend? o Micro-economic effects: - Tightened credit conditions. - Downgrade with regards to credit insurance. - Funding of projects at risk. - Cancellation and postponement of orders. - Increasing late payment by clients. - Risk of “cascading bankruptcies” throughout the supply chain. What was at the beginning of this history of a mortgage/housing crisis in the USA? The facts are briefly presented in chronological order [1]: - Easy credit from years 2002 -2005, combined with the assumption that house prices would continue to increase, encouraged lenders, borrowers, and speculators to enter into various types of loans the borrowers could not or would not repay. - This caused increased demand for housing construction, and thus, increased existing American home prices also. - Property values increased due to high demand and some home owners chose to refinance their homes and take out second mortgages against the added value of their home and use the funds for consumer spending. - Overbuilding of newly constructed homes increased supply. - Oversupply drove prices down. - Borrowers having trouble repaying their adjustable rate mortgages had difficulty refinancing or selling their homes due to the fall in market prices because over supply.
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Defaults on the loans began as interest rates and monthly payments increased, further increasing supply because of foreclosure. - As a result, overbuilding and the increase of foreclosures have increased the number of unsold homes to near historic levels. - This caused residential construction to decrease in many areas of the country. - It also caused many financial institutions across the nation and around the world to suffer significant financial losses due to the mortgage payment defaults. - The crisis is still unfolding with government, economic, and banking professionals speculating that it could take years to end. Public funding of projects ensured growth of construction sectors in Central and Eastern Europe until the middle of 2008. This sector had a bigger share in national GDP compared to countries of Western Europe: construction sector makes up 15 per cent of national GDP in Czech Republic, whereas only 6.6 per cent in the economy of Great Britain [6]. Czech construction companies are commissioned to construct the essential infrastructure and public buildings (hospitals and court buildings). Increasing living standards cause increase of possibilities for people to take mortgage loans for housing. The Austrian group Strabag has realised way back the fact that the growth of Eastern regions is caused by these factors. One third of its annual income amounting to EUR 9.43 million comes from this region (Spink, 2008). In the period between 2001 and 2008, the growth of Lithuania’s GDP and personal income made a positive impact on infrastructure investment and private construction activities (see Fig. 2). Increasing/decreasing demand for construction caused rise/fall of construction prices. Such situation is observed not only in Lithuania but in other EU countries as well (see Fig. 3). The construction input price index (CIPI) shown in Figure 3 covers buildings and civil engineering works and is a Laspeyres-type price index reflecting the main input price changes in new construction over a definite period of time while maintaining the weight structure of the reference period. In Lithuania, the demand/supply ratio determined change of salaries for people working in construction (see Fig. 3).
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Gross value added - Construction, Percentage of total
10 8 6 4 2 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 EU (27 countries)
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Fig. 2. Changing share of construction in Lithuania’s and EU (27 countries) gross domestic product (Eurostat)
Residential buildings
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b) Construction - gross wages and salaries Indeks (2000=100)
Monthly CIPI as compared to 2000
a)
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Fig. 3. Construction gross wages and salaries (a) increase with growing amounts of construction work (b) and decrease in the period of crisis (Eurostat) The acceleration characteristic of the current construction and real estate crisis has not been observed for a long time. Not since the early 1980s has the construction industry in the United Kingdom experienced such declines. Private housing starts, which fell 43% in 2008, are expected to fall another 32% in 2009 to levels not seen since 1952. Private commercial work has collapsed as the retail sector cuts back on its investment plans in the face of falling sales. Orders for new offices have fallen 47%. As a result, is forecasting that construction output on office projects will fall by 50% over the next two years. The only bright spot in the forecast involves sectors where construction output is linked to public spending. For example, spending on education projects is expected to grow by 28% over the next two years. Ankers also believes activity in the health care sector will remain strong [8]. Although most of the statistics from the forecasts, as highlighted below, paint an overcast picture of the U.K. construction economy similar to that of the United States' (see Figure 3), a few projections promise cause for optimism [8]: New construction work to fall 10% in 2009. No recovery in total construction output until 2012. Total housing starts (private and public) to fall to lowest level since 1924 (excluding World War II). Private housing repair, maintenance, and improvement to fall 15% during 2009. Rail construction work to increase 190% over the next five years. Public non-housing construction output to rise 22% in the next two years. Expanding real estate bubble revealed a number of trends worldwide. For example, too many and too high buildings were constructed in unsuitable places. Furthermore, the increase of home ownership exceeded the natural market rate. Society believed that housing prices would never fall. Credit standards were too loose at the peak of the bubble. Would it have been more efficient to invest the money into technology, manufacturing capacity, agriculture, education, etc.? Also follows some implications of the subprime crisis [2]: - Lack of confidence means people less likely to put their savings in banks. - Less funding in banks, means harder to obtain credit/loans for both households and consumers. - Less investment and slower growth in the future. McGraw-Hill Construction [9] recently reported a 40% fall in USA new construction starts (see Figure 4) for the first quarter of 2009 in comparison to the same time period in 2008. Residential building starts fell 8% in March and 52% for the first quarter of 2009 compared to the same months of 2008. Non-residential building fell 3% in March and 47% compared to first quarter 2008. Non-building construction rose 27% for March but fell 11% for first quarter 2009, in comparison to the same months of 2008 [9].
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Fig. 4. Number of granted permits for new residential buildings in Lithuania and index of new construction starts in USA (a) and housing starts in Sweden (b): declined sharply during the crisis
Not expecting a turnaround until the second half of 2010, the forecast suggests that a recovery in the United Kingdom will inevitably gather pace slowly as increasing private sector investment is offset by cutbacks in public spending and the government tries to rebalance its books, following the large increase in the borrowing requirement during the recession [8]. Figure 5 shows the change of construction production and construction cost for new residential buildings in EU27, UK and Lithuania over time.
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b) Construction production, Index, 2005=100, Percents
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Fig. 5. EU19 construction production (a) and construction cost for new residential buildings (b) in Lithuania, EU27 and UK
The absolute majority of current buyers take loans to buy housing. The term of mortgage loans varies between 30 to 40 years. Each family must assess its possibilities, to try to forecast possible future income and to consider job loss risk before taking such a loan. The Consumer Confidence Index is a perfect illustration of consumer expectations. The European Commission initiates consumer opinion polls. Such polls are performed by interviewing 1,200 respondents from a random sample. The Consumer Confidence Index is the arithmetic medium, which balances the positive and negative answers to 4 questions: changes of the household financial capacity, changes of the situation of national economy and changes of unemployment levels (with opposite sign), as well as possibility to save money within coming 12 months. Though the Consumer Confidence Index had been growing in the EU for a long time, it turned around in the second half of 2007, upon the first signs of overheated economy in most countries. The fall of investment banks that began in the USA last autumn started a wave that reached European and Eastern markets thus making the Consumer Confidence Index fall down at unseen depths. Consumer Confidence Indicator 30 20
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Fig. 6. Change of consumer expectations over time in EU, Sweden, UK and Lithuania
The Lithuanian housing affordability index, compared to countries of Western Europe, was usually the lowest; it managed to exceed 100 only in the period between 2001 and 2004, when the conditions of credit taking improved and before the rapid growth of housing prices started. In 2005, growing housing prices caused the affordability index to fall again; in 2007, its value was only 63 and was the lowest among all 8 compared countries. However, the housing affordability index began to grow once again in 2008, when housing prices started falling and income was still increasing. In March 2009, this index was equal to 75.9. Despite dropping incomes and worsening loan conditions, the housing affordability index might continue growing in Lithuania in next years due to falling housing prices.
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Fig. 7. Changes of the housing affordability index over time in Ireland, UK, the Netherlands, Germany and Lithuania Residential demand is influenced by: the “permanent” available income (negatively affected by the unemployment which is expected to rise from 7% to 8.7% in 2009); the interest rates (very low) and credit availability (more restrictive conditions are to be expected); the state of the market (declining house prices and unsold stocks in some countries); the possible tendency to raise precautionary savings Residential renovation could achieve a better level of activity if the announced stimulus measures in favour of energy efficiency do succeed. Non-residential is mainly influenced by the business climate (low investment levels); public buildings investments (health, education) are expected to increase (but not in every member state). R&M is less sensitive to the business cycle. Civil engineering features a mixed up situation. For the whole region, a status quo is expected but actually as the balance between decline in some member states and expansion in others. Of course, the national and European recovery plans will hopefully provide a temporary boost in public works. On the other hand, local authorities may cut back their spending due to reduced fiscal revenues. In general, it seems that the Eastern European countries will be the least impacted by the crisis. Poland, Romania, Czech Republic forecast good construction activity growth rates for 2009. Hungary is an exception but its economic difficulties started already before the crisis. Bulgaria also faces difficulties but to a smaller extent. This has been namely worsened by the recent suspension by the EC of 560 million € pre-accession aid and by the cancellation of big infrastructure projects (Detemmerman, 2009). Some industry sectors heavily effected by the crisis (banking/finance, construction, wood manufacturing, consumption related sectors, textile, electronics, furniture). Key factors for the Swedish financial crisis in 1992 [4]: o Fixed exchange rate (high inflation created an overvalued Krona). o Liberalized credit market (created competition in the credit market that eventually started to lead to weak controlled credits). o Changed tax reform (dramatically increased costs for loans which forced many to sell property). o High inflation (major reason for hampering the declining Swedish export).
The trends of changes of the harmonised index of consumer prices for housing are similar in EU27 and Lithuania (see Figure 8). The Harmonised Index of Consumer Prices (HICP) for housing is an indicator of inflation and price stability for the European Central Bank. HICP - HOUSING, Index, 2005=100
EU 27
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Fig. 8. The trends of changes of the harmonised index of consumer prices for housing are similar in EU27 and Lithuania. Collapse of companies or firms is part of our reality. The situation is determined both by financial tension and other types of tensions in society and government, and it may affect international community as well. Though attempts are made to forecast and recommend action plans for cases of threatening bankruptcy, collapses of organisations spread from sector to sector and from country to country uncontrollably. Scientists (Marwa and Zairi, 2008) studied documents of 120 companies involved in various activities, which collapsed in the period between 2000 and 2007, and looked for similarities or differences in activities of top managers. Six of the companies operated in the construction sector. The specified reasons of their failure could be described as follows: – Group 1. Reasons that could be described as internal: accounting errors, discrepancies with calculations, poor construction quality, internal disputes, contract prices blown out of proportion and lack of integrity in project management; – Group 2. Impact of immediate (micro) environment: unsuccessful merger, rapid expansion, big receivables, failure to meet deadlines, big operating expenses; – Group 3. Effect of macro environment: falling sales, competition, financial barriers. Housing starts in Sweden, USA and Lithuania declined sharply during the crisis (see Figure 5). Other global development trends (general regularities) of construction and real estate crisis in developed countries and of Lithuania and Belarus, in conceptual (textual, graphical, numerical, etc.) and quantitative forms, has been described analogously. The competitiveness of Belarus substantially depends on the development of the building and real estate sector. The role of building branch in economy of Belarus have been increasing lately – specific gravity of building in GDP has made 9,8 % in the first quarter of 2009 . The branch realizes a considerable part of investment activity of a national economy.
Construction, % 2001
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So, for January-March 2009 as a whole in republic was used 8049,8 billion rbl. of investments in a main capital, provided rate of growth of investments at the level of 120 % (with the forecast for 2009 123-125 %). At the same time the specific gravity of construction and erection works has made 45,1 % in total investments volume in the Republic in the I quarter of 2009, which is 4 pct higher in comparison to the level of 2008.
20000 15000 10000 5000 0
In a fixed capital
It is obvious, that state bodies consider this branch to be the locomotive of growth of the national economy in the conditions of decrease in business activity.
130 125 120 115
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1 quarter 2 quarter 3 quarter 4 quarter 1 quarter 2008 2008 2008 2008 2009 According to the Decree of the President of Belarus №291 from June, 3rd, 2008, 23,5 million sq. m of a total area of habitation.
15 10 5 0 2009
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2011
To realize the intended plans, it is necessary to involve considerable investments in building and the industry of building materials. Thus it is necessary to realize, that such extensive requirements for investments and priority allocation of resources in building will occur to some extent at the expense of other branches and kinds of activity. It will increase the risk of diversification growth delay of the national economy and disbalance increase. With the purpose of given risks compensation it is necessary to accomplish the investments into its development during the branch management taking into account the changes of economy requirements in the future. With the purpose of given risks compensation it is necessary to accomplish the investments into its development during the branch management taking into account the changes of economy requirements in the future. In other words, the sector should develop on an innovative basis so that investments carried out today wouldn’t restrain economic growth in the future. The decision of the assigned problem, as well as transition of the whole economy of Belarus to an innovative way of development requires the development of both branch, and general, horizontal mechanisms of stimulation and activization of innovative activity at the enterprises. The financing mechanism of innovative activity at the expense of innovative funds means which has been developed since 1996 allows to increase a share of new production, however only at the expense of the centralized deductions included in the cost price of production. As a result the possibility of innovations financing is reached at the expense of decrease in the general competitiveness of production. At that stage of development funds have lost in many respects the function of R&D support which was one of the main at their creation. Following the results of 2007 170,3 billion rbl. or
9,6 % from the general size of the used funds means was turned to financing of scientific researches and works on preparation and development of new kinds manufacture of high technology production.
200 150 100 50 0 2005
2006
2007
Fig. The general size of the used means, billion rbl. Problems of growth of innovative activity in building are common for European countries. In the future it can become the reason of labour productivity decline and delay of growth of quality of a life of the population. In particular, scientists notice, that labour productivity in building sector grows in 2,5 times more slowly, than in other branches of economy.
100% 80% 60% 40% 20% 0%
Ряд 3 Ряд 2 Ряд 1
Fig. Labour productivity in building sector
Figure 1. Share of Mortgage Transactions in the Housing Market
Currently loan interest rates under loans for housing purchasing are varying between 11 to 19% per annum and in average are equal to 14-16% p.a. The rate equal to 12-15% in foreign currencies and 16% in BYR should be considered typical for the market. Interest rates offered by Belarusian banks two-three times exceed those existing in countries with developed mortgage lending systems. For comparison purposes: in the U.S.A. А 15-year mortgage loan is equal to 24%, in Baltic countries - 3,3-3,5%. Of approximately 30 operating banks only around a dozen are rendering services related to extending loans to individuals for housing purchasing or building. Major forms of loan and interest repayment security are sureties by individuals and legal entities, pledge of purchased housing, pledge of real estate or another property available, as well as pledge of legal claim on a flat being constructed with further pledge of purchased property. This significantly reduces loan debt risk. According to international standards the annual volume of housing real estate should be maintained on a level equal to 1 sq.m. per person. Belarus is inhabited with 10 mln. People , hence it is required to annually build around 10 mln. Sq.m. and this figure is scheduled to be reached by 2011 (in 2008 г– around 5). In order to reach the U.S.A. housing figure Belarus is required to additionally build approximately over 400 mln. sq.m. of living area. The Government is planning to annually build 8-10 mln. sq.m. of housing area. This means that 65 sq. m. of housing area per person will be built approximately inз 45 years (to 2053 ). Security of the population by habitation in different countries is following:
Figure 4. Security of the population by habitation Government –supported housing construction in 2005 averaged USD per 350-370 per 1 sq. m. For individuals in housing line in 2007 the cost of such construction with individual share will average around USD 460–470 per 1 sq. m., and in the near future it is expected to exceed USD 550–600 per sq. m. Currently new housing in Minsk is sold at market prices equal to USD 1700–2200 per 1 sq. m. In this way an average 67 sq.m. flat will cost USD 21,5–25,0 thou. while its market value is USD 65–87 thou. Easy-term housing is planned to be up to 80%, the rest 20% will be commercial housing. In order to save money for building a cheap two-room flat a Belarusian
family of three persons with monthly income equal to USD 500 will need 46 years. (Such family of three persons should monthly spend at least USD 450. Let us assume that the remaining USD 50 the family would place in a bank to save USD 600 a year. Therefore the family will need 46 years to buils a two-room 60 sq. m. flat at the cost of USD 460–470 per 1 sq. m.). Hence, even in case of Government-supported housing construction for many individual s such housing will remain to be unpurchaseable. The cost growth of sq.m. in Minsk averaged by 32,8% a year, while average wages grew by 26.3%) (fig.5).
Figure 5. Housing availability in Minsk Housing availability in Minsk reduces with every year (fig. 6)
Fig. 6. Housing availability in Minsk in 2002-2007 and prognosis for 2008 Only 15–20% of Belarusians have enough funds to build housing without any external aid, and а wages of a Belarusian builder are 8 times lower as compared to his Swedish colleague. Sociological researches show problems and prospects of consumer investment and crediting.
The careful analysis is necessary for situation forecasting in the real estate market with revealing of corresponding interrelations with processes occurring in economy. The most vivid example of the situation in the real estate market is the USA. In the USA the real estate prices were overestimated in 1979, 1988-89, and also in 2004-2007. As result, the next years sharp falling of the prices was observed, and further within several next years rates of a rise in prices for houses remained stable (figure 7). Price per 1 sq.m.
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Figure 7. Dynamics of Growth of Prices, GDP and Income in USA In Belarus the real estate prices are also considerably depend on personal incomes and gross national product (fig.8).
Figure 8. Dynamics of Growth of Prices, GDP and Income in Belarus
Figure 9. Dynamics in Price changes per 1 sq.m. in Minsk New building flats in Minsk are offered at commercial prices equal to from USD 1600 to 2500 per sq.m. Share construction average price in Minsk amounts to USD 2020 per. sq.m. (in May 2006 it wasUSD 1050 per. sq.m.). Kiev: average price in the secondary market is equal to USD 3528 per sq.m. (since early 2008 it grew by 6,74 %, since January 2007 - by 21,8 %.) The average price for flats in the
primary market in Kiev is lower as compared to the secondary market and amounts to USD 2710 per sq.m. Moscow: average price in the secondary market isUSD 4697 per sq.m. (it grew since beginning of 2008 by 5 %, since Januaryя 2007- by 11 %. ). These data were collected from real estate website Realt.by. Besides this innovative decisions of a problem of processing of the firm waste formed in the EU countries annually in number of more 1300 million т from which more than half of volume fall to the building share[4 are necessary, with. Ecological influence of branch reflects the fact, that the building sector is second-large emitter CO2, and in buildings is consumed an order of 42 % of energy.
For the purpose of the decision put above problems taking into account experience of the developed countries employees of chair of economy and management at the enterprises of chemical-wood complex of BSTU have prepared the demand for financing of the international project «the Sustainable development through training and an exchange of innovations in building and real estate sector». Creation of the international alliance of the universities carrying out of a research part of the project including definition of factors which form innovation sectors will be which problems is planned. The considerable attention will be given revealing of organizational, contract and financial structures which make active innovations and constant training that is слабоизученной area even in the developed countries The educational part of the project is aimed at overcoming of mental restrictions and resistance to innovations by means of remote training. And, at last, creation of the virtual centre of support of innovations in sector of building and the real estate, the creation aimed at activization and distributions of innovations, cooperation development, rendering of consulting and research services is provided.
3. Conclusions Acknowledgement. We are thankful Belarusian fund of fundamental research for the travel support of one of the author – Nikolai Siniak Various methods and models (time-series analysis using multiple regression, Box-Jenkins analysis, seasonality analysis methods; three-index model, time-varying parameter model behavioral macroeconomic portfolio model of international capital flows, post-Keynesian models, calibrated macro models) for crisis analysis, forecasting, simulation and management in the construction and real estate sector and in separate segments thereof are applied worldwide. It may be noted that researchers (Pavlov and Wachter (2009), Bond et al. (2006), Lu and So (2005), Glascock and Kelly (2007), Werner (1994), Nishiyama (2006), Minsky (2005), Bernanke and Gertler (1999), etc.) from various countries engaged in the analysis of crisis in the construction and real estate sector and in separate segments thereof did not consider the research object being analysed by the authors of the present research (see Section 3). The latter may be described as follows: a life cycle of a construction and real estate industry, the stakeholders involved as well as micro and macro environment having a particular impact on it making an integral whole. A complex analysis of the research object formulated was made with the help of new methods multiple criteria project analysis specially developed for this purpose.
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