Press Release on EBI Construction Activity Report Q1 2022
The Hungarian construction industry started off this year with an exceptionally high Activity Start indicator: nearly HUF 1,300 billion worth construction works started in Q1 2022. The Activity Start of EBI Construction Activity Report in the first quarter is a new record (construction works have never started in such a high value in one quarter) and exceeded the level of Q2 2021 (the highest so far) by almost 37%. Yet, this spike is mainly thanks to the launch of two major projects: 1) the Soroksár-Kelebia section of the Budapest-Belgrade railway corridor and 2) the road section between Kecskemét and Szentkirály on M44.
EBI Construction Activity Report Hungary analyses the construction industry on a quarterly basis, including the volume of newly started construction works and the value of projects completed in each quarter in aggregate and by segment as well. It is prepared by Buildecon, Eltinga (creation of indicators and development of algorithms for aggregation) and iBuild (project research and project database). The EBI Construction Activity Report Q1 2022 has been released and can be purchased at firstname.lastname@example.org.
Stagnant building construction
The value of started building construction projects was slightly more than HUF 430 billion in the first 3 months of 2022; a good start to the year. The Activity Start of EBI Construction Activity Report was a bit below the value of the same period of the previous year but compared to the last two quarters of 2021, there has been no major change in the Activity Start of building construction. And the first 3 months of 2022 were considerably better than the period between April and December 2020.
Within building construction, the Activity Start of residential construction was modest: the value of started construction works stayed below HUF 90 billion. The Activity Start indicator of non-residential buildings was almost HUF 350 billion in Q1 2022, lower than the very strong first 2 quarters of 2021, but almost the same as the values of Q3 and Q4 2021.
The biggest started building projects in Q1 2022 included Kovács Katalin National Kayak-Canoe Sports Academy in Sukoró, eMAG logistics centre in Dunaharaszti, and ActiCity Event Center in Veszprém. In Budapest, the construction of BEM Center office building and Kimpton Hotel (District 2), as well as Phase 2 of Corvin 7 office building (District 8) entered construction phase.
Big numbers in civil engineering
Construction start on the Budapest-Belgrade railway line between Kelebia and Soroksár, and the section of M44 between Kecskemét and Szentkirály brought an outstanding Activity Start indicator for civil engineering. The total value of launched projects went up to an unprecedented HUF 850 billion between January and March 2022; twice the previous record value of Q1 2018. The Activity Start of civil engineering in the first 3 months of 2022 exceeded the full annual value of both 2020 and 2021.
The total value of road and railway construction works within civil engineering was almost HUF 800 billion thanks to these two large-scale projects. It is indeed the highest value of the last decade. But non-road and non-railway civil engineering projects, similarly to the last two quarters of 2021, started in a low value again.
In addition to these two big-volume projects, key civil engineering projects include the Phase 2 of main road 33 (Debrecen).
The share of Western Hungary fell
In Q1 2022, the share of Central Hungary was the highest, 46%, in started construction works, an increase of several percentage points over its share in previous years. 38% of the total value of projects entering construction phase was in Eastern Hungary, while the share of Western Hungary almost halved (16% compared to 29% in the period of 2014-2021).
In 2021, out of all regions, the Southern Great Plain and Budapest saw the highest total value of projects launched. Western Transdanubia accounted for 6% of the total value of construction works.
Modest start of multi-unit residential construction projects
New multi-unit residential projects are being launched at a moderate pace. The total value of such projects started to drop in Q1 2022 compared to Q4 2021. The numbers also fell short of Q1 2021. Between January and March 2022, the Activity Start of multi-unit residential construction was HUF 85 billion. Developers are cautious to start new projects: market uncertainties like hiking and unpredictable building material prices and supply chain issues are making it difficult to plan. There are also demand-side risks owing to more expensive financing.
Key projects launched in Q1 2022 comprised works in Budapest such as the construction of BRG building of BudaPart residential project (Phase 6) in District 11, as well as Phase 1 of Le Jardin residential project and BLU residential complex in District 13.
Although the total value of projects completed between January and March 2022 was just over HUF 40 billion (the lowest Activity Completion indicator in recent years), a close-to-record completion is expected in multi-unit residential construction works this year. However, supply chain disruptions may slow down project completions, and thus, some projects may be delayed until next year.
The share of multi-unit residential construction works in the regions was rather unequal in Q1 2022. 72% of the total value of such projects entering construction phase was concentrated in Central Hungary, 71% in Budapest, which is more than 10 percentage points higher than in 2014-2021. The shares of Eastern and Western Hungary shrank, and the share of the former one from the Activity Start indicator was only 12%.
In Q1 2022, construction projects starting in Western Transdanubia grew even though the two mega projects mentioned earlier (that boosted the numbers in Q1) do not belong to this region. The value of EBI Construction Activity Report’s Activity Start indicator in Western Transdanubia neared HUF 90 billion; higher than in any quarter of 2021. The improving figures of Q1 were less visible in the values of the last 4 quarters though, owing to the weak figures of 2021 when Activity Start for building construction stayed below HUF 150 billion. In case of civil engineering, projects started on a bit more than HUF 70 billion. When it comes to the total value of started construction works, the peak year in Western Transdanubia was 2018 when the works of M85 road and the construction start of the Körmend-Rábafüzes section of M8 elevated the Activity Start indicator.
Multi-unit residential buildings
When it comes to multi-unit residential construction, in Q1 2022 Western Transdanubia witnessed the highest Activity Start indicator of EBI Construction Activity Report in the last two years. In this region, the total value of such projects peaked between 2016 and 2018, started to decline thereafter, and since then the annual values have stagnated.
In 2017-2018, the implementation of several larger projects started in the region such as City House residential park in Mosonmagyaróvár or Rakpart22 and Vénusz Garden condos in Győr. The Activity Start of EBI Construction Activity Report was lower in 2020-2021, but there were projects starts such as Márta Residence nursing home in Nagycenk and Phase 1 of Keszthely Bay Resort residential park in Keszthely. In Q1 2022, key project starts included the Hattyú Street condos in Győr.
As per data by the Central Statistical Office, much fewer housing permits were issued in Western Transdanubia in 2020-2021 than in 2016-2019. The number of permits issued for the multi-unit segment was especially lower. As multi-unit housing projects obtaining a permit yet this year may sell homes at 5% VAT until the end of 2026, permit may as well increase this year, as was the case in Q1. But these projects are only set to start if market conditions are favourable.
2020 and 2021 saw an outstanding Activity Start of non-residential buildings in Western Transdanubia. The projects started at that time included Port Hotel Medical & Spa in Hévíz, Mindszenty József Museum and T4 phase of Nestlé Purina pet food production plant in Bük. Among the biggest non-residential projects started in 2021 were Water Adventure Park in Győr and Nestlé Balaton plant in Bük.
2022 didn’t start badly either. After the sky-scraping numbers of Q4 2020 and Q1 2021, the region posted the third highest Activity Start in the last 6 years in non-residential constructions in Q1 2022. In February 2022 construction started on the Research and Development Center and Campus in Kőszeg.
2018 registered by far the highest civil engineering Activity Start in Western Transdanubia thanks to the construction of various sections of M85 expressway, the section of M15 motor-road between M1 motorway and Rajka, as well as the already mentioned east Körmend-Rábafüzes stretch of M8 expressway.
In the years after 2018, due to the start of larger projects, EBI Construction Activity Report’s Activity Start indicator of civil engineering soared: the construction of Fertőrákos junction-Sopron border section on M85 expressway (in Q3 2019) or the 2 sections of main road 83 between Győr and Tét (in Q3 2020).
The value of civil engineering works started in the region in Q1 2022 was outstandingly high compared to any quarter of 2021 and almost reached the Activity Start value of the full last year.
Original article in Hungarian: Tünde Tancsics, ELTINGA
English version: Eszter Falucskai, Buildecon