Looking at the last 4 quarters, the largest number of projects was related to the Northern Great Plains region whose share in the national Activity-Start was 30% (after a slight decrease). Budapest came second where 26% of construction works started, so its share grew. And Pest County came third with a 12% share. South Transdanubia had the smallest share in the value of started construction works (only 4% of the national value in the last 4 quarters). Overall, the biggest part of the national Activity-Start was still connected to Eastern Hungary (45%), less than 38% to Central Hungary, while the share of Western Hungary did not reach 17.5%.
Countrywide, Q3 2023 saw the value of started construction works in Hungary slightly drop over Q1-Q2 2023. Between July and September, the Activity-Start indicator of EBI Construction Activity Report accounted for a little less than HUF 600bln. This also means that the first 9 months of this year were quite modest. Activity-Start did not reach HUF 2000bln and fell short of the value of the first 9 months of 2021 and 2022. The difference compared to 2021 was 11%, while compared to 2022 there was a 35% decline. The decrease at constant prices was even greater in the first 3 quarters of 2023: compared to the first 9 months of 2021 almost 40% lower, while compared to the first 9 months of 2022 nearly 46% lower value of construction works started between January and September 2023.
Building construction
In Q3, somewhat more construction works started in building construction than in Q2, but overall, all 3 quarters brought a very similar Activity-Start. In the first 9 months of the year, the value of started building construction works totalled HUF 1400bln, less than in the same period of 2021 and 2022 (the drop compared to the former was 11%, compared to the latter it was almost 18%). At constant prices, the decrease was even bigger: the Activity-Start indicator of EBI Construction Activity Report was 40% and 31% lower between January and September 2023 than in the respective periods of 2021 and 2022. The last time we saw a value of started building construction works lower than this was in 2015.
In case of multi-unit housing construction works, the value of construction starts in Q3 was roughly at the level of Q2, but more modest than in previous years. In case of non-residential construction works there was a minimal increase in Q3 compared to Q2, but the first 9 months still saw a lower Activity-Start than in 2022 and 2021. The decrease at current price was 8% compared to the two years prior, and 15.6% compared to the same period last year. But the decline at constant price was much bigger (37% and 29% respectively). After filtering out the change in prices, the last time we saw lower numbers was in 2016.
The largest building construction projects launched in Q3 this year included several offices such as BudaPart Corso, Central and Harbor office buildings, Zugló City Center Offices 5 and 6, the reconstructions of the Ministry of Agriculture and the Palace of Justice, but also phases 1 to 4 of the Buildings A and B of the Technical Faculty of the University of Debrecen, and phase 1 of the renovation of the MTA (Hungarian Academy of Sciences) Headquarters and Library. Several industrial and warehouse projects entered construction: AN1 logistics hall of HelloParks in Alsónémedi, the production and storage hall of Leier, phase 2 of the half-shaft and cardan shaft manufacturing plant of GKN Automotive, phase 1 of Horváth Rudolf Intertransport Logistics Center, and Velux GP4’s industrial hall.
Civil engineering
After the first two successful quarters this year, Q3 brought one of the lowest Activity-Starts in civil engineering in recent years. Overall, in the first 9 months, the value of started works for the period of 2017-2022, except for 2020, fell short of the Activity-Start at current price for the first 9 months of each year. At constant prices, it barely exceeded the value of works launched in January-September 2015, while in the following period it was considered exceptionally low.
The weak third quarter was mainly owing to the drop in road construction, while some growth was recorded in non-road and railway. In the first 9 months of 2023 road and railway constructions started at much lower than the 2022 record. It exceeded the like-for-like Activity-Start of 2020 and 2021 but did not reach the value of projects started between January and September 2017 and 2019. At constant price, every year after 2015, Activity-Start surpassed 2023 in the first 9 months of the year.
Few civil engineering projects made it to the biggest construction projects. The highest-value one was the reconstruction of the Biatorbágy-Szárliget main railway line followed by several projects related to water and sewerage systems.
Pest county
When looking at the past 4 quarters, Pest county’s share of construction starts was the third highest. It was so despite the fact that in the first 9 months of 2023 there was a decline in the Activity-Start of EBI Construction Activity Report here, and based on recent years, construction works started in the county in the lowest value. In the first 9 months of this year the largest non-residential projects included the construction of CECZ E-commerce Industrial and Logistics Park and that of the logistics halls of HelloParks (Páty PT2 and Alsónémedi AN1).
The decline was attributable to the shrinkage in building construction. In the first 9 months of 2023, in Pest County construction starts were almost 40% lower than in the same period of the previous year and 17.5% lower than in the first 9 months of 2021.
Civil engineering works continued to be at a very low level in the county. Among the biggest such projects that started in the first 9 months of 2023 were the renovation of the previously mentioned Biatorbágy-Szárliget main railway line and several water and sewerage system-related ones.
Multi-unit housing
Multi-unit housing construction works continue to be lower than in previous years, and Q3 brought a slight decrease after the promising Q2 figures. Thus, overall, in the first 9 months of this year, the value of multi-unit home construction starts fell short of 2021-2022, and Activity-Start of EBI Construction Activity Report here dropped back to the 2020 level. Between January and September 2023, the value of started construction works was about 29% lower than in 2022 and 26% lower than in 2021. At constant price, the difference is much bigger (against two years ago almost 50%, while against last year a bit more than 40%). After 2015, 2023 has seen the lowest Activity-Start at constant price for the first 9 months of the year.
On 1 January 2024 a major change will be effective. In cities, the existing CSOK (the family housing allowance program) will cease. Conditions for the CSOK loan will also change: it will remain available to couples planning to have another child, but CSOK+ will provide a much higher preferential loan than previously. The higher loan can be a great help to those planning to buy a new home, but due to tight conditions, the new preferential loan will be unavailable to a massive number of customers who have been eligible until now. Another disadvantage is that so far only those claiming CSOK could benefit from the tax discount and the possibility to reclaim VAT as well.
For the multi-unit housing market, a key factor may still be the return of affordable loans, which can start purchases again, including projects. Loan interest rates decreased, but for the time being, they are still considered very high. The other question in terms of market development is the strategy of investors as they represent a serious group of buyers in the market for new homes (current high yields on government bonds are a good alternative for them compared to the housing market). Hence, no wonder that developers are careful with project launches. And even though larger investors did start some new projects, there were examples of scrapped ones.
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 Q3 2023 has been published and can be purchased at ebi@ibuild.info.
In Q3 2023 the value of completed multi-unit buildings exceeded the like-for-like figures for 2021 and 2022. A big number of projects is expected to be completed yet this year, so this year’s value may exceed last year’s completion value if these projects are indeed completed as scheduled despite the delays.
Budapest continued to see the biggest share of multi-unit housing works start. When looking at the previous 4 quarters, the share of Central Hungary was almost two-thirds in Activity-Start. The share of Western Hungary rose over the previous quarter to over 20%, while only less than 14% of multi-unit housing construction works were connected to Eastern Hungary.
Original article: Tünde Tancsics, ELTINGA – English version: Eszter Falucskai, Buildecon