Q2 2023 sees better Construction Activity-Start in Hungary than Q1

Press Release on EBI Construction Activity Report Hungary Q2 2023

Q2 brought an improvement over Q1 in the Activity-Start of EBI Construction Activity Report: between April and June construction works started in the value of HUF 754 billion in Hungary, a more than 30% increase over Q1. It was an expansion compared to H2 2022 as well. The rise against the previous quarter was visible even at constant price, although Activity-Start was still behind the quarterly figures of 2021 and H1 2022.

The value of started building constructions keeps registering a drop

In Q2, construction works started in building construction at an even lower value than in Q1, so Activity-Start has been decreasing for the third consecutive quarter. The value of started works was barely more than HUF 400 billion; it fell by 16% in Q2 over Q1. The lag is even bigger compared to the outstanding second quarters of 2021 and 2022. At constant price, the value of building construction works started in one quarter has not been this low since 2015.

The decrease at current price was typical for non-residential constructions. Multi-unit housing recorded a minimal improvement in Activity-Start, although the indicator here stayed very low. In non-residential, the total value of works started was nearly 20% lower in Q2 than in Q1. At constant price, it was in Q3 2016 when Activity-Start was lower than this value.

The biggest projects launched in Q2 this year were the Correctional Facility in Csenger, Inpark metalworking plant in Debrecen, Boysen electric car battery plant in Nyíregyháza, HelloParks Logistics Hall in Páty, the next building of Weerts Logistics Center, and several larger multi-unit residential projects.

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). EBI Construction Activity Report Q2 2023 has been published and can be purchased at ebi@ibuild.info.

Civil Engineering Activity-Start sees a considerable expansion

The Q2 2023 Civil Engineering Activity-Start of EBI Construction Activity Report posted a more than 30% growth against the corresponding period a year earlier. And compared to Q3 and Q4 2022, as well as Q1 2023, the increase was exceptional. The last time Activity-Start in the segment was higher than this was in Q1 2022. In April-June 2023, the value was close to HUF 350 billion and the increase was noticeable even at constant price: in comparison with Q1 2023, the value of started construction works nearly quadrupled. But compared to previous years, this Activity-Start at constant price cannot be called an outlier.

Road construction contributed most to the expansion in Q2. Activity-Start in the segment was nearly HUF 300 billion, the third highest value after the first quarters of 2018 and 2022. At constant price, however, the value seems to be outlier only in the period between 2020-2023 and Q1 2022.

The high Civil Engineering Activity-Start was mainly thanks to the start of two road projects: the construction of M3 highway-Ököritófülpös section of M49 expressway, and the construction of Törökszentmiklós-Kisújszállás (East) section of M4 expressway.

Northern Great Plain still a leader

Looking at the last 4 quarters, Activity-Start was mostly concentrated in the Northern Great Plain region with a share of 33.7%. Construction works with the second highest value started in Budapest with 20.4% in Activity-Start, while Pest County came third with 12.4%. Due to the major construction start value of the Northern Great Plain, most projects started in Eastern Hungary in the last 4 quarters, nearly half of the value of constructions belonged here. The share of Western Hungary was less than 18%.

Moderate growth in the value of started multi-unit residential buildings

Few multi-unit residential construction works started in Hungary, a little above HUF 50 billion, mainly a few larger projects. And although Q2 brought a rise in Activity-Start, the value of the indicator was far below the quarterly numbers of 2017-2019 and 2021-2022. At constant price, the volume of Q2 2023 resembles the years of 2014-2015. Such few multi-unit residential projects have not started since H1 2015 (at current price) and since 2014 (at constant price) than in H1 2023.

Now there is still a lot of uncertainty regarding the future development of the market. Loan interest rates are falling slowly, which may have a positive effect on demand, but from next year, several elements of the family support CSOK available for buying a home will also stop in cities where multi-unit buildings were typical. So overall, developers can still be cautious with project launches.

The value of completed multi-unit buildings grew in the first half of 2023 compared to the same period of last year, and somewhat exceeded the figure for the first half of 2021. In total, projects worth around HUF 150 billion reached completion. Another significant Activity-Completion is expected for this year. If delays do not greatly change handover dates, the value of the completed multi-unit buildings may exceed last year’s.

In the last 4 quarters, the biggest share of multi-unit residential projects (61.4%) started in Budapest, while 64.3% in total concentrated in Central Hungary. Eastern Hungary’s share was 16.1%, while Western Hungary had 19.6 % in total Activity-Start.

Northern Great Plain in detail

The region registered a major growth in Activity-Start during the last one and a half years. In H1 2023 the value of started construction works grew by 29% over H2 2022, exceeding HUF 500 billion. The spike was particularly dramatic in the second quarter, breaking the previous record several times with Activity-Start being almost HUF 450 billion.

The expansion in the first half of the year was mainly attributable to civil engineering. Building Construction Activity-Start decreased compared to H2 2022, but the reduction compared to H1 2022 can be considered minimal: a total of slightly more than HUF 200 billion worth of construction works started in the first 6 months of this year. The weaker first quarter numbers were behind the lower construction start value, but the second quarter brought a significant Activity-Start in the region. In the Northern Great Plain, the non-residential segment saw large-scale project starts between April and June, surpassing HUF 160 billion. In the first half of the year the region saw the construction start of the Helicopter Base in Szolnok, BMW logistics center in Debrecen, and the already mentioned Boysen electric car battery plant in Nyíregyháza and the Correctional Facility in Csenger.

Unlike non-residential, multi-unit residential constructions fell in the region this year. The drop was already noticeable in the first quarter, and the Activity-Start indicator decreased further in the second quarter, falling to a fraction of the quarterly values of previous years.

Civil engineering took off in the Northern Great Plain and spiked in Q2 2023. There has never been such a high Activity-Start in the second quarter in the region. This was primarily due to the start of the road works previously mentioned among the largest projects and was related to the continued construction of M49 and M4 expressways.

Original article: Tünde Tancsics, ELTINGA – English version: Eszter Falucskai, Buildecon

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