Q1 figures were started to be published, so we will continuously refresh the viz with these data in the coming weeks. So far, Slovenia and Romania have permit figure about Q1. Both countries remained pessimistic. The decline in Slovenia is moderate, while in Romania it is quite steep and led by the residential submarket. In Croatia and Serbia we only have info until February, both countries remained close to the level of the previous quarter, Croatia has edged slightly up, while Serbia shows some slowdown. Bulgaria witnessed a huge rebound at the end of 2023.
You may use the dropdown for selecting either the residential or the non-residential submarket, or both.
Q4 permit data in Türkiye, the third after the big earthquakes, brought good figures again. So the latest 3 quarters were far better than the similar ones in the preceding year. And it is still true to both the residential and the non-residential submarkets. Permitted m2 has doubled since the latest trough at early 2020. The great optimism that characterized the market until 2017 has not yet been reached, though. You may check the Country-by-country sheet of the viz for long series. Break-away from the low point did not happen in Ukraine in Q4 2024. Residential permit looks very bad, but non-residential has been coming back in the latest 3 quarters.
In the full visualization, not only permit but completion data can be followed.
In the coming weeks several Q1 data will arrive, and the round will be completed with the Ukraine figs in June. So please check back, the viz will be updated continuously.
An opinion of Dejan Krajinović, Beobuild Core d.o.o., EECFA Serbia
The news that Budapest is entering an investment partnership with the Abu Dhabi based property developer Eagle Hills echoed in the Serbian media since the company has been building a similar project in Belgrade for 11 years now. Their ambition to expand in the regional market has been pronounced in recent years with ongoing initiatives in Albania and Croatia as well. Although Belgrade was the maiden project in Europe for the developer, all projects seem to be arranged in the same way. They are particularly interested in large-scale multi-billion redevelopment projects with bilateral government agreements assuring state support and exclusive market position.
Belgrade Waterfront project with St. Regis Tower, photo by Beobuild
Abandoned railway site put into new use
Just like Budapest, Belgrade had a vast redevelopment area on a former train station covering some 100 hectares of exclusive riverfront property. The area was abandoned by the Serbian Railways after the completion of the new railway node, so it was largely unused, except for some storage and distribution facilities that remained. The Serbian government already had close relationship with the UAE, so negotiations began with Mohamed Alabbar, founder of Emaar Properties. To have a powerful investor taking on the entire redevelopment sounded perfect, the government was on board, and soon the initial deal was signed valued at EUR 3.5 billion, including the construction of around 1 million sqm of multi-purpose facilities. Belgrade Waterfront project was thus born: a core cluster of residential and commercial high-rises on the banks of the Sava River.
Dubious from the start
Controversies included the lack of transparency, broken procedures, redacted contracts and no public or professional debate. The governmental measure to suspend legal procedures for the project by adopting ‘lex specialis’ proclaimed it to be a project of national interest, enabling mandatory land expropriation and suspending tender procedures where procurements are impossible to control. The government was behind the project in full force, ready to remove obstacles for its smooth realization. So, the monumental project left public domain and the country’s legal framework, leading to dissent and public protests for months. The government decided to force realization, which created division in the capital city, fueling a long-lasting political conflict. More than 10 years later, various public organizations and activist groups are still fighting to stop the expansion of the project and are seeking legal conclusion.
Big-league urban renewal project
The initial phase of the project is now largely completed, but in the meantime, Eagle Hills acquired two more plots in Belgrade (50 hectares combined). The commercial success of the initial phase includes around 8000 residential units sold, so UAE investors are here to stay. And why wouldn’t they? Land may be acquired without competition; urban planning rules don’t have to be respected; and there’s massive municipal assistance on infrastructure. Such a large-scale urban renewal project requires enormous financial commitment for new infrastructure from the municipal government: hundreds of kilometers of new piping, dozens of kilometers of new boulevards, energy infrastructure, not to mention the related public transport investments and other indirect expenses. It can also affect the development of existing and older neighborhoods, their need for improved infrastructure since the city budget needs to commit resources in the long term to this new project. Additionally, these massive projects encompass a major share of commercial function (hotels, shopping centers, offices and other related facilities), which can affect commercial investments in other parts of the city. A project of this size creates a new center that can relocate activities and impact demand for both space and services in other locations.
Belgrade Waterfront project, photo by Beobuild
Without having to pay the initial cost of land, Eagle Hills is in a competitive advantage to other investors. Their initial investment appears to have been relatively small, and through the years the project development was mainly funded by reinvested profit from residential sales. In that sense, the bombastic titles of the influx of massive billions are a bit deceiving; however, it will create a new construction hotspot in the city that will stimulate local economy for years to come. It is still unknown how much they invested in Belgrade so far, but it certainly surpassed the initial value of the contract. And if announced expansion plans materialize in Belgrade, the initial figure of EUR 3.5 billion could easily double in the coming years. The speed of its development can depend on market conditions and demand, but if commercially successful as Eagle Hill’s Belgrade Waterfront, the Budapest project will certainly expand as well, particularly if state and municipal governments are ready to fully accommodate the process.
The experience of Belgrade with the Waterfront project has been altogether nightmarish, though. It became a political divide, represents a dubious legal precedent, and created local resentment that still lingers. Many Belgrade citizens cannot consider it positive for valid reasons, so it may remain politically and legally contested for years to come. Although Belgrade Waterfront achieved a relative market success, when a commercial project creates long lasting negative social and political consequences, its benefits diminish. Let’s hope Budapest will do better than Belgrade.
There was no construction start indicator in Romania, so we have created an estimation for it.
This poster is a summary of our monthly findings. It shows how the total value of started construction works have changed over the same period last year. Besides, it presents which segments have the biggest start value in the current year. We call this indicator Activity-Start. And they are computed every month for 18 construction segments by aggregating real construction projects. The projects are from the iBuild database and ELTINGA and Buildecon found the way of creating indicators out of them.
If you need short-term foresight, you will like it.
Brief comment from Janos Gaspar, head of Buildecon:
Although it is still in the red, Activity-Start in building construction looks much better than in the previous round. This is mostly because of the non-residential submarket. More specifically the other non-residential segment where a huge military base project, commenced in Q1, was accounted. Activity-Start in the multi-unit residential submarket keeps going down in the meantime. The big minus in civil engineering is mostly because the base is very high; enormous projects started this time last year.
Every month this poster will be available here on our blog. If your interest is deeper, we have the EBI data visualization (with indicators for all the 18 segments of the construction market), updated monthly and we have the EBI Construction Activity Report Romania (with data and explanations), published quarterly in English and in Romanian. All these are packed into a yearly subscription. For the specifics, please contact us.
A budapesti Déli körvasút építésének megkezdése miatt a mélyépítés részpiac Aktivitás-Kezdése szépen néz ki, a tavalyi nagy visszaesés után pluszba fordult. A magasépítési projekteknél ez a fordulat még nem látszik. A megkezdett nem-lakás magasépítési projektek összértéke tovább csökkent. A társasházi lakásépítés Aktivitás-Kezdése folyó áron pedig kb. akkora mint a tavalyi első negyedévben.
A poszter a két nagy építési részpiac Aktivitás-Kezdés indikátorának időszak/időszak változását mutatja, valamint a szegmenseket amelyekben a legnagyobb értékben indultak kivitelezések. Ezt a posztert minden hónapban kitesszük ide a blogunkra. A teljes építési piacot részletesen bemutató EBI Építésaktivitási Adatvizualizációt (összesen 18 szegmens adataival) is havonta frissítjük, és negyedévente az EBI Építésaktivitási Jelentésben is elmondjuk, hogy mit látunk a piacon. Ha érdeklik a részletek akkor a contact oldalon írjon nekünk.
Due to the commencement of the Southern Rail-ring in Budapest, the Activity Start of the civil engineering submarket is looking good, after last year’s big decline, it turned positive. This turnaround is not yet visible on the building construction projects. The total value of the started non-residential construction projects continued to decrease. And the Activity Start of multi-unit residential buildings, measured at current price, is approx. as much as in the first quarter of last year.
The poster (above) shows the period/period changes of the Activity-Start indicator in the 2 main submarkets and the segments with the largest value of started works. This poster is published every month here in the blog. The EBI Construction Activity Data visualization with the details on the whole construction market (with altogether 18 segments) is also updated monthly and the EBI Construction Activity Report, summarizing what’s happening in the market, is published in each quarter. If your interest in construction markets is deeper, please contact us for the details.
Activity-Start, that is, the total value of started construction works, greatly increased (+64%) in 2023 across Romania compared to the previous year. It reached the highest level seen in the past decade, both as gross value and growth rate – according to the EBI Construction Activity Report. Even more impressive is the serendipity that as Activity-Start of building construction began to decline, civil engineering sprang up to cover the difference and more.
What is EBI Construction Activity Report? There was no construction start indicator in Romania, so we have created an estimation for it. It helps you understand what could happen on the market in the coming months. The indicators are based on project information from iBuild project database and are published monthly in the EBI data visualization (for all the 18 segments of the construction market). On top of this the EBI Construction Activity Report Romania is published quarterly with data and explanations. This research is a fruit of the cooperation among Eltinga, Buildecon and iBuild. And this is where the name EBI comes from.
Civil engineering in the spotlight
Residential multi-unit buildings seem to have peaked in 2021 in terms of the Activity-Start indicator. With construction costs rising in 2019, followed by high inflation and interest rates, it seems developers were less optimistic about the market’s short-term outlook and consequently, they started fewer projects.
When it comes to non-residential construction, 2023 saw a slight downturn after a very good performance in the previous year. The main factor was Bucharest where the current issues regarding urban planning, compounded with wavering demand, slowed down the development of new buildings across all non-residential segments, but mainly in the office sector.
With the spending deadline for funding from the EU 2013-2020 programs at the end of 2023, a surge in activity in civil engineering was to be expected, and this also explains why Q4 was milder than previous quarters in terms of the Activity-Start. The projects that had a reasonable chance to reach an advanced stage or to be phased into the new programs were prioritized and started in previous quarters.
Of all the projects that started construction in 2023, one stands out: the 37.4km section (Cornetu – Tigveni) of the A1 motorway will be one of the most complex and expensive road segments build so far in Romania since it crosses the Carpathian Mountains and will require 12km of bridges, tunnels and viaducts. It will also have the longest motorway tunnel built so far in the country (1.7km), nearly five times larger than the current record holder.
Several renewable energy projects were also started in Q4 2023: a 102MW wind energy park in Braila County and a 60MW solar plant in Alba County, signaling a renewed interest in green sources of electricity after the recent volatility in the prices of fossil fuels.
The third spot on the list of the largest projects that began in the last quarter of 2023 is taken by the 12,000-seat Sports Arena in Targoviste. The local football team there (FC Chindia – named after a tower built in the city by Vlad the Impaler) had to play its games on other cities’ stadiums in the four years it was in Romania’s First League as its local arena was considered inadequate.
Less glamorous, but equally important, work was also started in Q4 2023 on the water and sewer networks in Dambovita, Iasi and Brasov counties, part of the ongoing efforts at national level to improve the existing infrastructure and provide increased access to public utilities.
When it comes to building construction, all top projects started in the last quarter of 2023 were residential parks, three of which were in Bucharest (Theodor Pallady residential area, Nusco City Phase 2 and Cortina Elysium, totaling more than 1600 flats) and two more in Sibiu County (Magnolia Residence Phase 2 and a residential complex in Selimbar, adding nearly 1000 more flats).
Bucharest loses the first place in Activity-Start
2023 was an unusually even year regarding the regional distribution of the Activity-Start indicator. Previously, Bucharest-Ilfov took the largest piece of the pie and accounted for around one quarter of the value of construction works started in each year. In 2023, however, it lost its lead because other regions saw major increases in Activity-Start, while it and the Center underperformed compared to the previous couple of years and fell behind. The slowdown in Bucharest was visible across the board with drops in new projects, both in civil engineering and buildings. Infrastructure starts had previously peaked in 2022, and the focus switched to completion, while urban planning issues limit new developments for all segments.
The North East region had a boost moving from the third least active right to the top of the podium in terms of Activity-Start. Likewise, West shot up to the top half from the very last position that it held for four consecutive years.
North West region: steady as it goes
While other regions, as mentioned previously, saw major upward and downward changes in their share of the national started construction works, North West maintained the second place that it usually holds. Behind this veneer of stability, however, lies an uneven evolution of different construction types, the EBI Construction Activity Report suggests. Activity-Start indicator (deep orange on the chart) of the building construction submarket began strong, growing fast in Q1 and Q2, and then it plateaued, while civil engineering had a very different path, having a boom in activity in Q3.
Much of the growth can be attributed to the Cluj Napoca – Episcopia railway electrification (166 km), that in itself accounted for almost 1/3 of the value of all started construction works in North West in 2023. The fastest passenger train on this railway averaged 60km/h, with added delays at the Hungarian border and in Cluj caused by switching locomotives from electric to diesel and vice versa. The new electric line will remove this impediment and allow speeds up to 160km/h for passenger trains and the doubling of the lines will facilitate cargo transit as well.
Other major construction works started in 2023 in the North West include several sections of the much-delayed A3 motorway as well as airport terminals in Cluj, Satu Mare, Bihor and Maramures counties. The region attracted several manufacturing investments with the largest project in the building submarket being the Nokian Tyers factory that started construction in Q2 2023 in Oradea.
Healthcare and education buildings are a rising concern due to the aging stock and limited access to services. Thus, extensions of the emergency clinics in Oradea (5.500sqm) and Bistrita (9.750 sqm) also started in 2023. In the same year, work began on a new private school in Oradea (29 classrooms) and on renovating a university building in Cluj County (10.000 sqm).
Cluj Napoca gained notoriety for its tight residential market. Limited deliveries and high demand have pushed the prices here higher every year, and it’s now the most expensive city in the country for home buyers. Supply is slowly expanding with phases of larger projects like Elite City (279 flats) and The Nest (102 flats) starting construction in 2023. Several multi-unit projects were also completed here in 2023, including Liberty Residential (268 flats) and Seasons by Studium Green (150 flats).
Completions (light orange) in the North West were on an upward trend for the past couple of years with building construction overshadowing civil engineering. This is poised to change starting with 2024 as the expected completion of infrastructure projects started by 2023 could even out the field. However, road and railroad projects in Romania have had a long history of delays, cancelled contracts and legal woes, thus, some caution is in order when looking forward.
During 2023 nearly 30km of motorway on A3 were completed on two sections. However, one of them (Nusfalau – Suplacul de Baracu) is quite isolated, so its usage will be limited until it’s connected to the remainder of the network, in 2025 at earliest.
With good Activity-Start and completions, Output (blue) also had a favorable evolution in 2023 for both buildings and civil engineering. Enforcing the idea of steadiness of the North West, Output showed steady growth in each quarter of the last couple of years, at least at current prices.
The major challenges for the North West region in the upcoming years will be to find new avenues of growth, especially in the building segment, and to secure funding and manage ongoing works for infrastructure construction. To quote Lewis Carroll “[…] here we must run as fast as we can, just to stay in place. And if you wish to go anywhere you must run twice as fast as that.”
With the latest governmental decision, the number of projects in designated rust belt action areas reached 53 in Hungary. Around 18 thousand homes are known to be under and before construction within these projects. The sole purpose of this post is to follow these projects and to see how they will or will not help the recovery of the new residential construction sub-market in Hungary.
The graphs were updated on 2 May 2024.
Brief background
Rust belt action areas (let me shorten them to rusty) are practically brownfield areas with special benefits. The owner of the site or the developer should initiate the process (with specific development plans) and there is a Committee to examine if the proposed site is entitled for the rusty status. Based on the opinion of the Committee, the final decision is made by the government. The decisions (about the exact sites) are announced in a decree and the special benefits coming with it are:
priority investment status, meaning e.g. faster permitting procedures1,
newly built homes can be sold at 5% VAT without limitation in time2,
By the current regulations, it means a min. 5% and a max. 27% price advantage over competitors developing on non-rusty area until 2028 (depending on when the permit was obtained) and a 27% price advantage from 2029 on.
Our focus
What we do is to turn the mentioned decree into information we need for forecasting. With the help of Eltinga Building Permit Monitor database and the iBuild project information database, actual projects are identified from the lot numbers specified in the decree. Among all the general project specifics, the number of dwellings (where it is known), are attached to these projects.
The map shows the stages of the housing projects that were given rusty status. Bluish dots are those before construction, neon yellow dots are those under construction and the dot disappears once the project is completed.
OK, it is very convenient to see projects on a map, but our focus is more on the chart under the map where the yellow is the number of homes under construction.
What we are curious about is if and when the right end of the yellow curve shows a strong upturn.
In other words, we are curious whether the regulation ignites a recovery or not. As of now, it is more common that the yellow line has increased because projects having started in the past were given the rusty status. (So they were just re-qualified, it did not mean that new project starts.) In parallel, it is less common that projects start after they were given the status. Just two extreme examples for these: Unipark Buda has been under construction since 2019 and it got the rusty status at the end of 2023, while Láng quarter was given the rusty status in 2021 and it is still before construction.
The charts will be updated monthly, so check back if you are also curious.
Another way we like to look at it is a list. Here we do not separate the projects to phases (like on the map) and it gives a quick understanding on how each rusty project moves ahead from 1 February 2024 on.
Data sources
The data mostly come from Eltinga Building Permit Monitor (in Hungarian: Építési Engedély Figyelő). This is a very detailed database on before construction multi-unit housing projects in Budapest. It is aiming primarily at developers who would like to understand the competition. For further information on this, please turn to Mr Zoltán Sápi, Eltinga, sapiz@eltinga.hu. Besides, we used the iBuild project information database.
Written by Dr. Sebastian Sipos-Gug – Ebuild srl, EECFA Romania
Brașov, Romania – Photo by Zoltan Rakottyai on unsplash.com
Dr. Sebastian Sipos-Gug, EECFA’s researcher on Romania, visited the affordability of homes several times in the past as an argument for market stability and to counter doomsayers. Last time he did so, however, he wrote that the residential market was approaching a turning point. And last year, despite decelerating growth in average home prices, the hike in interest rates made housing less affordable for those resorting to a mortgage loan. In case of cash buyers, on the other hand, affordability grew to historically high levels.
Change in useful area in home permits issued in 2023 vs 2022 (own calculations based on data from NSI)
While official output data is lagging a couple of years, some indicators are painting a less optimistic picture. For instance, permits for homes dropped massively in 2023 like-for-like (-24%) and real-estate transactions also declined (-10%). Decline in the useful area in permits for residential buildings seems to be a national issue since only a handful of counties saw an increase in the useful area permitted, while the usual drivers of growth (Bucharest, Center and West regions) were in the red. This does not mean construction will necessarily decline since the permits issued in 2021 and 2022 were at historically high levels, but it does put a cap on the growth potential of the market. EECFA looked at these figures in more detail and provided forecast up to 2025 in the latest EECFA Forecast Report.
Housing affordability: a key indicator of the stability of the residential real estate market
Housing affordability can signal potential issues in the near future such as right before the market crashed in 2008 one could see that prices became disconnected from income, pointing to a speculative market. Decreasing home affordability can also have a negative impact on economic growth as it diminishes the available share of income that can be used for optional purchases.
A commonly used indicator of housing affordability is the time it would take to purchase a 70sqm home with the average monthly gross wage. While this indicator has merits in allowing international comparisons, it is preferable to look at net wages instead as fiscal changes in 2018 (moving tax burden from employers to employees) would have otherwise distorted the indicator by introducing a break in time series.
Home affordability for cash buyers: sqm in an average 2-room apartment one could afford with the average monthly net wage(own calculations based on data from NSI and imobiliare.ro)
Homes were getting more and more affordable for cash buyers as prices grew more slowly than wages in most years from 2009 onwards. However, this simple model fails to explain all of the data. If it were true that more people could afford homes, we should see a surge in purchases. If not enough homes were for sale, prices would rise quickly. Since we are not seeing either, one needs to assume that some other factor is at play here. A potential solution to this conundrum lies in the fact that cash transactions are estimated to account for slightly more than half of all transactions, with the remainder being funded by mortgage loans.
Accounting for mortgage loans, however, requires some assumptions to be made. Namely, purchasing a home with a mortgage loan that has a 25% downpayment, a 30-year loan term, an average interest rate for the respective year and no additional costs and a debt-to-income ratio of 40% of the national average net wage (currently the legal maximum with some exceptions).
This shows the impact that increasing interest rates to combat inflation has had on housing affordability. While in 2021 the average individual could purchase an average home (under the previous assumptions) of 60sqm, by 2023 this had declined to 47sqm, meaning that for borrowers homes are the least affordable in the last decade.
Home affordability for mortgage buyers: sqm one could afford with mortgage (25% downpayment, 30-year term, 40% debt-to-income ratio of average monthly net wage)(own calculations based on data from NBR, NSI and imobiliare.ro)
What’s in store for the future?
From what we see, the major trends with impact on home affordability are somewhat optimistic:
Interest rates are to drop as the National Bank is set to reduce reference rates once inflation comes down. With current national and EC forecasts placing inflation within the target range by 2025-2026, a gradual reduction is expected in the reference rates by then (a positive impact on mortgage affordability).
Income growth rate has outperformed the increase in home prices in all but two years since 2008. With a robust labor market and a modest but positive outlook of the economy, wages are set to keep growing in real terms in the near future.
Rentals are an increasing alternative to purchasing a home. Traditionally, Romania has one of the highest home ownership rates in the EU (97.7% at the time of the 2011 census), but the recent uptick in rents signals a rise in demand for housing, so this warrants closer monitoring. Depending on the availability of supply, this could mean more transactions or a higher price point since a share of current renters will consider converting to a mortgage, should it be more affordable.
Rent and home price growth rates(own calculations based on data from NSI and imobiliare.ro)
Demography is on the decline. The overall population shrank by more than 5.3% between the two censuses of 2021 and 2011, especially in the southern part of Romania (apart from Ilfov). This should, in theory, make housing more affordable, but the demographic decline is most prevalent in less desirable rural areas, so the impact might be minimal.
Demographic changes between the 2011 and 2021 censuses (own calculations based on data from NSI)
If left unchecked, the combination of these two trends (housing is less affordable for mortgage borrowers, but housing affordability for cash buyers is record high), could lead to increased wealth inequality in longer term. For now, they seem to cancel each other out and demand is somewhat mollified. Nonetheless, Romania remains above the EU average in terms of housing affordability, and, assuming no unexpected changes in market dynamics, it is predicted to improve in the near future as inflation and interest rates come down.
Hungary’s construction sector failed to improve in the last quarter of last year; the total value of started construction works shrank against previous quarters. Overall, 2023 registered low numbers and the Activity-Start indicator of EBI Construction Activity Report did not reach HUF 2,500 billion. This means that the total value of projects entering construction phase dropped by a respective 19% and 34% compared to 2021 and 2022, and Activity-Start in 2023 was roughly the same as in 2019. But if we look at the rate of decrease at constant price, it is even more significant: 43%-44% over 2021-2022. The last time the value of Activity-Start at constant price was lower than last year was in 2015, but even 2013-2014 exceeded last year’s.
Building construction works declined in Q4 2023
Even at current prices, the subsector has not produced such a low quarterly Activity-Start as in October-December 2023. Thus, the lower numbers of the first 9 months did not improve, and for the whole year, building construction works started at less than HUF 1,750 billion: 19% down from 2021 and 23% down from 2022. At constant price, the Activity-Start indicator for 2023 was 44% and 34% lower than in the previous two years. Only 2015 witnessed a lower Activity-Start than 2023.
Within building constructions, Activity-Start decreased in multi-unit residential buildings and in non-residential ones, too. In the latter, Q4 lagged dramatically behind the quarterly numbers of previous years. Last time the value of non-residential buildings entering construction phase in a quarter at current price was lower than that was in 2016. For the whole year, the Activity-Start indicator of non-residential buildings sank by 17% and 22.5%, respectively, over 2021 and 2022. Filtering out the change in prices, the lag is even greater: the level of Activity-Start at constant price in 2023 was 42% and 33% lower than in the previous two years. It was only in 2015 when lower numbers were registered.
The biggest building construction projects launched in Q4 2023 were several logistic facilities and warehouses (HelloParks Páty PT3 logistics hall; Phases 1 and 2 of LG Magna manufacturing plant in Miskolc; ZF Chassis Modules Hungary vehicle assembly plant in Kecskemét; ZF Chassis Modules Hungary manufacturing plant and warehouse in Debrecen). In addition, the project of the Hódmezővásárhely Military Secondary School and Dormitory, the renovation works of the Chemistry building of the Faculty of Science of Debrecen University, as well as Phase 1 of the renovation works of buildings B1, B2 and C of the University of Veterinary Science in Budapest started.
Civil engineering stagnated at a low level
Although there was no further drop in civil engineering, its Activity-Start was very low in Q4 2023 with about the same value of started constructions as in Q3. Thus, Civil Engineering Activity-Start in 2023 massively dropped against 2022 (a year considered an outlier), but the value of the started works did not reach the 2021 level either; and it turned out to be somewhat lower than in 2020. In 2023, there was a 17% drop in the subsector against 2021, and a 50% shrinkage over 2022. The constant-price decrease was even greater: almost 60% over 2022 and more than 40% over 2021. Between 2013 and 2023, at constant price, only the Activity-Start of 2015 was lower than that of 2023.
Hardly any road and railway construction works started in Q4 2023, while much more other civil engineering works entered construction phase. In 2023, road construction works started at a higher value than in 2020-2022, but railway construction works fell greatly last year: here Activity-Start at current price was only lower in 2015. Thus, overall, during the year, the Activity-Start of road and railway constructions was around 19% lower than in 2021, while it was almost 60% less than in 2022 (a year considered outstanding).
The largest civil engineering projects in Q4 2023 were mostly related to water and sewerage in Tolna and Bács-Kiskun counties, in Adony and Ercs regions, in Tamási and vicinity, in Várpalota and vicinity, as well as in Csemő, Cibakháza, Nagykőrös, Tiszafüred, Jászszentandrás, Tápiószőlős and Kengyel.
Most project starts are still in Eastern Hungary
In the past four quarters the biggest share of construction projects started in Eastern Hungary with the region’s share in Activity-Start being 42%. Budapest accounted for 26% of the value of projects entering construction phase. After Budapest, Northern Great Plain had the second highest share, 25%, followed by Central Transdanubia and Pest County with 10% alike. In the last 4 quarters, 21.5% of construction works started in Western Hungary, and 36% in Central Hungary.
Sunk interest in building multi-unit homes
After the promising numbers of Q2 and Q3 last year, there was another decrease in the Activity-Start indicator of multi-unit residential buildings. During the whole 2023, the value of such started constructions did not reach HUF 300 billion (-28% against 2022 and -30% against 2021). If we look at the period of 2017-2022, it only exceeded the level of 2020, however, at constant prices, the value was lower in 2023 than in 2020 (a year when the pandemic hit and VAT on new residential units was set back to 27% from 5%). It was only in 2015 when the value of started multi-unit residential constructions was lower. Compared to 2022, at constant prices, the decrease was 38%, and compared to 2021, it was more than 50%, as per the latest EBI Construction Activity Report.
This year brought major changes in state subsidies for home purchases. From 1 January, in cities only those planning to have additional children can receive CSOK+. Those who do not have additional children are only eligible for the village CSOK in beneficiary settlements. The so-called Baby Loan, although it remains available for married couples having a child, have more stringent rules. The new CSOK+ does not include a direct non-refundable support at the time of purchase, a bigger discounted loan can be applied for, and non-refundable support can only be obtained upon the birth of the 2nd and 3rd children when part of the outstanding debt is released. The new system does not differentiate between the purchase of used and new homes, making the previous advantage of new homes disappear. In addition, in case of CSOK+, one can no longer use VAT refund when buying a new home.
On a positive note, the money to be claimed has been raised, so it can be of great help in case of higher-priced new homes. Also, this year interest rates on market loans have greatly decreased compared to the beginning of last year, and it is expected to continue, so demand may recover in the new market, which may also improve the prospects of developers, encouraging the start of more projects this year than last.
In 2023 the value of Activity-Completion indicator in multi-unit housing exceeded HUF 350 billion, representing an increase of almost 28% compared to 2022, and surpassing the level of 2021 by 23%. This year also expects to see high numbers.
Although the biggest share of such constructions still started in Budapest, the capital city’s share in Activity-Start in 2023 slightly dropped over 2022. In total, around 60% of constructions started in Central Hungary, slightly more than 15% in Eastern Hungary, while the share of Western Hungary was a bit over 24%.
Western Transdanubia
Last year around 6% of started construction works concentrated in the Western Transdanubia region, the same as in 2022. Although due to the declining Activity-Start countrywide this meant a much lower value of started constructions than the year before, the drop was 34%. In 2023 Activity-Start in the region was lower than in previous years (-34% compared to 2021 and almost -44% below the 2020 value). The previous peak in the region was in 2018 when several large-scale projects were launched: M85 highway, M8 highway, and the section of main road 76 between M7 highway and Keszthely, and a stretch of M15 highway between M1 and Rajka.
The value of started building constructions in Western Transdanubia shrank last year; over 2022 there was a 34% drop, while compared to 2021 the decrease was 41%. The projects launched in 2023 included warehouses and factories, for example, the Nestlé Purina pet food production plant and warehouse in Bük or the Velux GP4 production hall in Fertőszentmiklós.
Civil engineering works were also at a low level in 2023 (-32% against 2022, but only an 8% drop compared to 2021). In 2023, only one regional civil engineering project made it to the larger projects; Phase 3 of the Zalaegerszeg vehicle test track. The last time a hike was registered in civil engineering was in 2018 thanks to large road projects.
Recent years have seen a declining Activity-Start in building construction works in Western Transdanubia. At the same time, Activity-Completion has exhibited growth; for instance, 2023 was a record year for the value of completed building construction projects. Projects that reached completion last year comprised several plants of Nestlé Purina, the Water Adventure Park in Győr, Sirius Hotel in Keszthely, and Buildings A1, A2, A3 of VGP Park Győr Béta.
Original article: Tünde Tancsics, ELTINGA – English version: Eszter Falucskai, Buildecon
Written by Dr Aleš Pustovrh – Bogatin, EECFA Slovenia
Slovenia is currently grappling with a pressing need for affordable rental housing as demand continues to outpace available supply. Thus, the Minister for Solidarity and the Future, Simon Maljevac, has unveiled an ambitious public policy plan aimed at constructing additional housing units. Dr Aleš Pustovrh, EECFA’s Slovenian researcher, has delved into the key components of the government’s strategy, examining the challenges it faces and the potential impact on the housing landscape in Slovenia.
Housing landscape in Slovenia: growing disparity between demand and supply
Minister Maljevac highlighted a stark reality that Slovenia lags behind the EU and OECD averages in terms of available dwellings per 1000 inhabitants. Statistical data reveals that there are only 410 dwellings per 1000 inhabitants in Slovenia. This shortage has led to a significant impact on housing prices, with an alarming 77% increase in the average price per square meter between 2015 and 2021.
Between 2015 and 2021 the number of households in Slovenia increased by almost 40,000, while only 23,000 new dwellings were constructed during the same period. This stark disparity has intensified the housing crisis, further driving up prices and making home ownership increasingly unattainable for many Slovenians.
Public housing solution: ambitious plan
Minister Maljevac believes that a crucial part of the solution lies in increasing the availability of public housing for non-profit rents. Currently, there are 23,000 such units managed by 13 local or national housing funds. However, the number of these units has remained stagnant due to minimal public investments in recent years: merely EUR 6 million in 2020 and EUR 4 million in 2021. Simultaneously, public expenditure on subsidies for for-profit rents is on the rise with an estimated annual +20%.
To address the housing crisis, the government has committed to building 5,000 new dwellings by 2026, starting with the construction of 1,000 units in 2024. The National Public Housing Fund (NPHS) plays a pivotal role in this plan. The NPHS capital was raised by EUR 25.5 million in 2023 and the same raise is planned for 2024. The NPHS will use these funds to construct its own residential dwellings and offer favourable loans to local and regional public funds or municipalities for their projects. An additional EUR 100 million in loan financing is also sought.
As the government’s plans are ambitious, there are concerns about their feasibility. The heavy reliance on public funding raises questions, particularly in a time when there are pressures to reduce public expenditure in Slovenia. The government’s dependence on public funding alone may pose a risk to the successful implementation of the plan. To enhance the viability of these plans, the government may need to consider attracting private financing and fostering public-private partnerships. Currently, such partnerships are limited in the Slovenian housing market, but they might become essential to realizing the government’s ambitious goals in the face of budget constraints.
Visit eecfa.com to obtain the EECFA Forecast Report Slovenia or to view a sample report. EECFA (Eastern European Construction Forecasting Association) conducts research on the construction markets of 8 Eastern-European countries, including Slovenia.
