The last quarter of 2019 saw another significant decline in launched construction projects in Hungary, amounting to only HUF 424bln worth started total construction works – as per the latest edition of EBI Construction Activity Report. Works started in the sector in a much lower value for the 2019 year as a whole as well. The drop in 2019 was 21% over 2018; and even compared to 2017, the difference was -11%. In 2019 the Activity Start Indicator of the Report totalled less than HUF 2200bln, compared to the almost HUF 2790bln a year earlier.
Building construction activity fell in Q4 2019
The Report has also found that in Q4 2019 building construction registered a lower value of started works than in the previous quarter, amounting to HUF 311bln. Overall, in 2019, Activity Start for building construction accounted for HUF 1364bln – significantly less than in 2018 and marking a decrease of 15%. However, calculated based on the ibuild.info project database, even the value in 2017 surpassed the 2019 one.
Weakening non-residential and multi-unit housing construction figures both were to blame for the slump in building construction. Multi-unit housing projects had also been seeing a decline in the value of Activity Start indicator over the past quarters, and the trend continued in Q4 2019 as well. Non-residential construction projects posted a much more modest drop.
Launched building construction projects in Q4 2019 comprise several hotels and office buildings, the construction of the Szeged Handball Arena, Phase I of Nagykanizsa multifunctional sports and event hall, upgrades of M3 Business Center buildings A and B, and renovation works of Hungexpo.
Published quarterly, the EBI Construction Activity Report creates aggregates from project data for 18 segments by object type (multi-unit residential, 9 non-residential segments and 8 civil engineering segments). It is prepared by Buildecon, Eltinga (creation of indicators and development of algorithms for aggregation) and ibuild.info (project research and project database). Full publications can be purchased at ebi@ibuild.info.
The fourth quarter of 2019 was very poor in civil engineering
Even though the period between April and September 2019 saw the start of civil engineering works in a massive value, Q4 2019 recorded a huge drop in numbers. Activity Start amounted to only HUF 113bln, the lowest value since Q4 2016 and only one-third of the value in Q3 2019. As a result, civil engineering closed the year with a massive decline, posting 30% fewer started construction projects in 2019 than in 2018 (a 22% drop against 2017). However, the 2019 Activity Start (HUF 835bln) is not considered to be extremely low in the segment. Rather, the years of 2017 and 2018 are considered to be extremely high.
In 2019, within civil engineering, mainly road and railway construction projects started in a much lower number than in 2017 and 2018, accounting for HUF 432bln. This was mainly due to the major decline in the Activity Start of railway construction projects, with only HUF 48bln of projects entering construction phase. The HUF 384bln worth Activity Start in road construction showed a much smaller difference compared to 2017-2018, and it surpassed the values in preceding years.
Started civil engineering projects in Q4 2019 are scarce, but include the construction start of the South Railway Bridge on the Danube in November 2019, for example.
Central Hungary was in the lead again in Q4 2019
Like Q3 2019, Q4 2019 also saw the start of fewer projects than in previous years in Eastern Hungary, offsetting the region’s high share in H1 2019. Thus, in 2019, 36% of the value of started construction works concentrated in Eastern Hungary.
Central Hungary was the other way around: while in H1 2019 its relative share in Activity Start was lower than in previous years, in H2 2019 it significantly exceeded it. The Report has found that between October and December 2019 more than half of the value of new construction works concentrated in Central Hungary.
There is a clear downturn in multi-unit housing construction
From January 1 this year, resetting the VAT rate from the previous 5% back to 27% brought a major change in the Hungarian multi-unit housing market. As of this year, units in projects having obtained a building permit after November 1, 2018 can only be sold at the higher VAT (above net prices). Last year, the approaching end-of-December deadline increasingly had a knock-on effect on the value of started construction works. The value of the EBI Activity Start Indicator for multi-unit housing construction amounted to only HUF 49bln in Q4 2019. For comparison, in all quarters of 2018 the value of projects started for three months exceeded HUF 100bln. In 2019, as a result of the downturn, construction works started in a total of HUF 263bln against the more than HUF 400bln in the previous two years. Last year, the EBI Activity Start Indicator for multi-unit housing construction fell 39% nationwide.
Despite the rosy figures of Q3 2019, only 44% of the investment value was concentrated in Budapest, so the capital city’s share in multi-unit housing construction dipped compared to previous years. It is not surprising, though, as in 2019 the shrinkage in construction starts was 51% y-o-y, according to the EBI Construction Activity Report. Central Hungary had a share of 52% of the total value of newly built multi-unit buildings, indicating a huge drop against previous years.
In 2019, the EBI Activity Completion Indicator Continue reading Lowest figures in started construction projects in Hungary in the past 3 years