Press Release on EBI Construction Activity Report Hungary Q3 2022
EBI Construction Activity-Start recorded a sharp falloff in Q3 2022. Between July and September, construction projects started at a value of less than HUF 480 billion – the lowest amount since Q3 2020.
The recent years have seen a considerable price rise in the Hungarian construction industry. In order to filter this out, the analysts of EBI Construction Activity Report compared the value of started construction works at constant prices, using Q3 2022 prices. Based on this, at constant prices, an even greater decline is seen in case of started construction works. In Q3 2022 they have registered their lowest value since 2015. At the same time, thanks to the successful first quarter, the drop was not yet visible based on the figures of the first 9 months, which even at constant prices exceeded the same periods of 2020 and 2021.
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 Q3 2022 has been released and can be purchased at email@example.com.
Value of building construction works down
The decline in Activity-Start witnessed in the construction industry as a whole was observed in building construction, too. The total value of started construction works was around HUF 300 billion, far below the typical first and second quarters. Looking at constant prices, the drop is even more visible. One needs to go back to Q1 2015 to find a lower value than this year’s third quarter. Yet, it is also true in case of buildings that the better first and second quarters pushed up annual figures.
The decrease was also true to residential and non-residential. For the latter, the Activity-Start of EBI Construction Activity Report was around HUF 260 billion, which, at current prices, fell short not only of the figures of the first two quarters, but also of most of the levels of quarters between 2018 and 2021. At constant prices, it was the lowest since Q1 2015.
Building construction projects launched in Q3 2022 included the W-Scope separator film factory in Nyíregyháza, and ParkSide Offices, RTL HQ, Zugló-Városközpont Offices 1 in Budapest. Work also began between July and September on Phase 2 of Campus in Kecskemét, Panattoni Park Budapest City West logistics center in Törökbálint, and the Hungarian University of Agriculture and Life Sciences in Gödöllő.
Press Release on EBI Construction Activity Report Hungary Q2 2022
Hungary’s high construction Activity Start in Q1 2022 was followed by a slowdown in Q2. The Q2 2022 EBI Construction Activity Report has found that between this April and June construction works started at a value of around HUF 800 billion. Although the value of projects entering construction decreased in Q2, these are not low numbers at all as Activity Start has been the 5th highest (on a quarterly basis) of recent years. It should be added, though, that recently construction costs have dramatically increased, massively pushing up the Activity Start indicator calculated at current prices, while at constant prices the volume would be lower.
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).
After a relative stagnation in previous quarters, Q2 2021 saw a considerable expansion in the Activity Start indicator of EBI Construction Activity Report. It was the first three months of 2018 last that witnessed a higher value of construction works to start in a quarter. In H1 2021, projects entered construction phase on a total of HUF 1,398 billion, marking a significant increase of 20% and 18%, respectively, against the same period of the previous two years.
EBI Construction Activity Report examines the situation of the Hungarian 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). Full publications can be purchased at email@example.com.
Compared to Q1 2021, Q2 2021 registered a continued growth in the Activity Start indicator of EBI Construction Activity Report for building construction. Overall, HUF 558 billion worth of construction works started in this submarket: the highest quarterly value in recent years. Due to the high figures for the first and second quarters of this year, the total value of construction works started between January and June grew by 19% like-for-like. And when compared to the same period in 2019, the rise amounts to 34%.
Within building construction, the Activity Start indicator of non-residential construction grew in H1 2021, 25% up from H1 2020. The expansion is mainly due to the particularly high Q2 figures. Projects entering construction phase include the SK Innovation battery plant in Iváncsa and the renovation of the headquarters of the Ministry of Finance and the MNB (Hungarian National Bank) in Budapest. The construction of several office buildings also began in Budapest, like Phase I of Dürer Park Office Building and Phase IV of Madarász Office Park. In Dunavarsány the first construction phase of Dunapack plant (paper packaging) also started.
The multi-unit housing segment witnessed a significant decline in Activity Start Indicator between April and June compared to the first three months of the year. However, Activity Start in H1 2021 shows only a minimal decrease over H1 2020 due to the stronger first quarter.
The civil engineering Activity Start indicator of EBI Construction Activity Report registered a substantial growth in Q2 2021 against Q1 2021. It was also the highest value in recent quarters. In the first six months of 2021, projects entering construction phase accounted for HUF 423 billion. Within civil engineering, both road and rail, and non-road and rail sub-markets saw a considerable growth in Q2 against Q1. The biggest civil engineering projects comprise the Bóly-Ivándárda section of M6 motorway and the construction of the new Danube bridge and related road network in Kalocsa-Paks.
The share of the total value of construction works launched in H1 2021 was the highest in the Western regions (39%), more than 10 percentage points higher than the average share of the region in previous years.
Yet, both the regions of Eastern and Central Hungary saw a lower share of started construction works in the first 6 months of this year than in previous years with Eastern Hungary recording the lowest share (27%).
After an exceptionally high Activity Start value in Q1 2021 over previous quarters, Q2 data showed a major decline in the multi-unit housing segment. The value for the first half of the year is thus slightly lower overall like-for-like.
As of 1 January 2021, new homes can again be sold at the reduced VAT rate of 5% (those that obtained a valid building permit until 31 December 2022 and will be sold until 31 December 2026). The higher value of construction works to start at the beginning of the year is no surprise; given the low VAT rate, developers can now start the plans previously parked due to the 27% VAT. This may have contributed to the spike in the Activity Start of EBI Construction Activity Report.
At the same time, there was little time left for investors to react to the VAT change announced last autumn, and it may take longer to plan and approve a completely new project. As a result, the actual start of construction works may be delayed, which may partly explain the weaker Q2 numbers. As the number of building permits rose in the first half of this year against last year (CSO data), the future may see an increase in the Activity-Start indicator of multi-unit housing construction as well. In addition, the ‘green loan’ effective from this autumn and the interest-free CSOK loan (Family Housing Support Program) for modern newly built homes may have a positive impact and increase demand for newly built homes.
When it comes to the Activity Completion indicator of multi-unit housing construction, it sank in Q2 2021 compared to Q1 2021. It may be related to the delay of construction projects as we can still expect many new multi-unit buildings to be completed in the following periods. In the first half of the year, projects worth a total of HUF 138 billion were completed.
Almost three-quarters of the total value of multi-unit construction projects that started in H1 2021 realized in Central Hungary, but this is mainly thanks to the high numbers in Q1. In the already weak Q2, the share of launched construction projects was slightly higher than in previous years in case of Central Hungary. The share of western and eastern regions was much lower in H1 2021 than in previous years, with the lowest share of multi-unit housing projects launched in the eastern regions.
Road and railway
Q2 2021 registered a major rise in the Activity Start indicator of EBI Construction Activity Report for the road and rail construction segments over the previous quarters. It was last in Q3 2019 when we saw a higher number than this one. Although construction works started on HUF 140 billion between April and June, data for the first half of the year are not outstanding due to the weaker first quarter, so the figures for the first six months were similar to those for the last half years, only showing a slight increase. The high Activity Start value in Q2 is attributable to the outstanding road construction numbers as rail construction works barely started.
Between April and June, far more road and rail construction works reached completion than in the first three months of the year. Within road and railway construction, the improving Q2 value can be attributed to railway construction, with projects worth HUF 74 billion completed between April and June, which is the highest number in recent years. In comparison, the value of completed road construction works amounted to only HUF 16 billion, after the already low value of HUF 9 billion in Q1.
Despite the high Q2 figures, the Activity Completion indicator in H1 2021 was lower than in H1 and H2 2020. It was last in in H1 2019 when a lower value of projects got completed than in the first 6 months of this year. In the coming quarters, however, road and railway construction projects may be completed in a significant value. And based on the expected completion date of projects, the value of Activity Completion indicator may be one of the highest in recent years.
Section A of M30 expressway between Miskolc and Tornyosnémeti already reached completion in the summer, and sections B and C are also set to be completed yet this year. It is also expected that the stretch between Szentkirály and Lakitelek of M44 expressway and the section between Körmend and Rábafüzes of M8 expressway will be completed.
In case of railway projects, Phase 2 of the Kelenföld-Pusztaszabolcs section was completed in the summer and they plan to complete the reconstruction works of the Rákos-Hatvan section of railway line 80.
EECFA has again examined the main changes in the prospects between the Autumn 2020 and Spring 2021 Macro Forecasts of the European Commission for those EECFA member countries which are covered by this forecast; Bulgaria, Croatia, Romania, Russia, Serbia, Slovenia, Turkey, plus Hungary.
Written by Bálint Parragi, EECFA Research, ELTINGA
After a severe recession during last year, the global economy as a whole could grow again in Spring 2021, and it is expected to continue doing so. As the first chart shows, GDP in all countries could recover fast and return to an increasing trajectory.
In Autumn 2020, projections showed the majority of the countries in the EECFA region with a stagnating or very slowly increasing economy. This was mainly due to the composition of the 3-year-average comprising a year with a very deep recession, and the two upcoming years with cautious estimations of growth. The only two economies with growth exceeding 1% were Serbia and Turkey (2.3% and 2% respectively) as these economies shrank least in 2020 (-1.8% and -2.5%).
On the other hand, the results are quite different in the European Commission’s Spring 2021 report where every EECFA country registers a positive GDP growth with all of them being at least 0.5%. The order of countries is almost identical to the one in Autumn 2020 and we can see a grouping of countries:
The first one is the group of the highest growing two countries, Serbia and Turkey again. This time, Turkey has a higher average growth, though (+3.7% and +2.8% respectively). The significant growth is the result of the slight contraction (or even growth) during 2020 (-1% in Serbia and +1.8% in Turkey).
The second group consists of countries with a negligible growth according to the Autumn 2020 report (+0.4-+0.7%) but with a more remarkable increase projected in Spring 2021; above 1% in each case and reaching 1.5% in Romania, Hungary, and Slovenia.
The economies in the last category: Croatia, Russia, together with the EU, all decreased according to the Autumn 2020 report, but in the Spring 2021 report it seems that they have better prospects in the future as they may grow to a little extent (+0.5-+1.1%).
When it comes to total investment (gross fixed capital formation) data, two general conclusions can be drawn:
Firstly, the projection in Spring 2021 is higher for every country than the Autumn 2020 values. The upward revision is especially remarkable for Turkey, Croatia, and Romania. This again could mean that economic recovery is expected to be a rapid process.
Secondly, the expected GFCF growth is positive in every country in 2021, except for Russia where it is close to zero. However, the countries are not homogeneous as Romania, Serbia, Turkey, Croatia and Slovenia have an expected growth within 4%-6%, but Hungary, Bulgaria, and Russia, as well as the EU, has a growth smaller than 2% (average of 2020-2021-2022).
Construction investment growth (where available – click the arrow on the chart above) has been revised upward everywhere, but while in Bulgaria it has grown by just 0.4 percentage points, it has multiplied in Hungary, Slovenia and Romania. For the latter, it has even exceeded 8% per annum. Construction’s share in total investment in EECFA countries and Hungary ranges from 55% (Bulgaria) to 64% (Romania), with Hungary and Slovenia in between (62% and 59%, respectively).
All these represents the Commission’s opinion. If you are curious about our opinion on Eastern European construction markets or you need construction forecast on segment level, please consult with the latest EECFA reports. For a sample report and order, visit eecfa.com
No improvement visible in Hungarian construction industry
The latest EBI Construction Activity Report has found that the stagnation of the total value of started construction works has not stopped. Between January and March 2021, construction works in the sector started on HUF 421bln. This, although not greatly different from the values seen in the previous three quarters, is still the lowest Activity Start indicator of the last two years. Compared to the January-March periods of the previous two years, 2021 started clearly weaker: against the positive Q1 2020, the decline was about 35%, but even over the same period in 2019, there is a 15% decrease.
Weak Q1 for building construction
The value of building construction projects in Q1 2021 showed a major decline over the same period of 2020 which brought an outstanding Activity Start, but compared to the other quarters of last year, the total value of started construction projects increased during three months.
In Q1 2021, a total of HUF 340bln worth of building construction projects entered construction phase, which was a weak three-month period compared to previous years. The previous trend also applies to non-residential buildings within building construction, where the Activity Start of EBI Construction Activity Report accounted for HUF 261bln.
Even though the drop was considerable compared to last year’s exceptionally high Activity Start in the first quarter, the value of construction works started for three months did not greatly differ from the other quarters of the year and the first three months of previous years. Among the biggest non-residential projects that began in Q1 2021, besides the construction of two office buildings, are the Water Fun Park in Győr, the second phase of Mercedes K1 press plant in Kecskemét, CTPark in Vecsés and HelloParks logistics centre in Maglód. The fortress reconstruction in Diósgyőr also started, along with Hunguest Hotel Panoráma Hévíz project and the construction of the Ice Age interactive showroom of the Zoo in Nyíregyháza.
EBI Construction Activity Report examines the situation of the Hungarian 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). Full publications can be purchased firstname.lastname@example.org.
Plunge in road and railway construction
Civil engineering saw a dramatic plunge; in Q1 2021 the value of such projects entering construction phase contracted by almost half compared to Q1 2020. Between January and March this year, only HUF 82bln worth of civil engineering projects were launched, evoking 2015-2016 levels, and representing one of the lowest values in the last five years. The drastic drop in road and railway projects largely contributed to the particularly low level of Civil Engineering Activity Start indicator of EBI Construction Activity Report. Since 2013, Q1 2021 has registered the third lowest value of started civil engineering projects.
The first three months of 2021 barely saw the start of any major road and railway projects. The Activity Start indicator of non-road and non-railway civil engineering projects also sank to HUF 63bln, marking the second lowest amount since 2016. At the same time, Q2 2021 may bring improving numbers in civil engineering as two major projects began in April: 1) the construction of the new Danube bridge between Kalocsa and Paks and the connecting road network, and 2) the construction of the M6 motorway stretch between Bóly and the Hungarian-Croatian border. Also, the EU budget cycle 2021-2027 starting this year is set to provide fresh funds for civil engineering projects.
In Q1 2021, the distribution of the value of construction works among the three regions was quite balanced. While the share of Central Hungary slightly dropped compared to the period of 2014-2020, the share of Western regions rose by the same rate. The share of construction projects started in the Eastern regions remained unchanged.
New impetus in multi-unit housing construction
From January 1, 2021, VAT rate on new home sales was lowered again to 5% from the 27% in 2020, giving a new impetus to multi-unit housing construction this year. The Activity Start value of EBI Construction Activity Report in 2021 thus might be way higher than in 2020. This process has already begun and is confirmed by data for the first quarter of this year. It shows that after a steady decline in last year’s Activity Start, growth resumed in January-March 2021: multi-unit housing projects began at almost the same value as in the same period in 2020. The value of Activity Start indicator for Q1 2021 was HUF 79bln which was surpassed by only two quarters in 2019 and 2020.
Unlike Activity Start, the Activity Completion of EBI Construction Activity Report increased steadily last year. This growth came to a halt in Q1 2021, but it comes as no surprise because the value of completed projects is traditionally a bit lower in the first quarter of a year. In the rest of the year, considering the expected completion dates, the value of completed multi-unit projects may remain as high as in the previous year.
Budapest & metropolitan area dominating multi-unit housing projects
In the first three months of 2021, launched multi-unit housing projects mostly concentrated in Central Hungary. The share of this region was 79%; a major increase compared to the average of 60% in 2014-2020. In parallel, the share of both Western and Eastern regions went down. The already low 15% share of Eastern regions fell to 5% in Q1 2021. The launch of several large-scale projects such as Phases 2 and 3 of Park West, BudaBright, Phase 3 of Waterfront City, BudaPart BRF and Sasad Resort SR6 contributed to the growth in Budapest.
Traditionally, larger-scale construction projects start in Budapest than in the countryside, and thanks to the already approved but not launched projects, developers here could react to the VAT change more rapidly. The increase in the share of larger projects is shown by the fact that although the Activity Start value improved compared to previous quarters, fewer projects started during the quarter than before.
Original article in Hungarian: Tünde Tancsics (ELTINGA)
Value of started construction projects on downward track in Hungary
Due to the pandemic, construction industry in Hungary last year registered a significant fall and the last quarter couldn’t save the year either. The latest EBI Construction Activity Report has found that Q4 2020, similarly to the low-value Q4 2019, saw the start of construction works at a value of HUF 442bln. Owing to the massive drop in mid-2020, 15% less construction work started than in 2019 and 30% less than in 2018. In 2020 the Activity Start Indicator of EBI Construction Activity Report accounted for less than HUF 2000bln (HUF 1990bln). And the decline affected all major subsectors.
The EBI Construction Activity Report Hungary examines the situation of the Hungarian 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 sector as well. It is prepared by Buildecon, Eltinga (creation of indicators and development of algorithms for aggregation) and iBuild (project research and project database). Full publications can be purchased at email@example.com.
Building construction registering yet another decline in activity
Although 2020 saw quite a strong start in building construction, the momentum slowed down from Q2 on. As per the latest EBI Construction Activity Report, except for the first three months of 2020, construction works in building construction started at a lower value than in the previous period. In Q4 2020 the Activity Start of EBI Construction Activity Report amounted to only HUF 280bln. Overall, the value of building construction works started last year was HUF 1353bln, much lower than in 2019 and 2018, compared to which the difference was 10% and 17%, respectively.
The main reason for the decline is the great drop in the number of multi-unit buildings. The total value of such projects entering construction phase in Q1 2020 even exceeded the numbers of Q1 2019. Yet, the shrinkage in the following 9 months was so large that the value of projects started in 2020 fell to the level of 2015-2016 in the segment, showing a decline of almost 40% over 2019. In case of non-residential buildings, there was hardly any discrepancy in Activity Start between 2020 and 2019.
The biggest projects launched in Q4 2020 include the construction of Hotel Hévíz in Hévíz, the restoration and development of the Citadel in Budapest, and the construction of several rural industrial and factory buildings such as Nestlé Purina pet food factory in Bük or the ZalaZone military plant in Zalaegerszeg.
Q4 2020 no savior of civil engineering
2020 was a mixed year for civil engineering. In Q1 it managed to maintain the Activity Start value of the same period of the previous year, and Q4 was 70% higher than the end of 2019. In contrast, the middle of the year was well below the 2019 figures with the value of construction works started in Q2-Q3 dropping by 45% against mid-2019. Overall, the HUF 636bln Activity Start indicator for civil engineering in 2020 was almost 40% lower than the average of 2017-2019. But compared to the 2010-2016 average, this value is still 25% higher, so the period between 2017 and 2019 can still be considered outstanding.
Within civil engineering, the total value of started construction projects in road and rail segments decreased by 32% over 2019. In case of non-road and railway construction, the drop was also significant, but we could see a more modest (15%) decrease than previously presented in the Activity Start of EBI Construction Activity Report.
The highest-value civil engineering projects launched at end 2020 comprise for example, the start of construction of the Budapest Athletic Stadium and the ZalaZone automotive test track in Zalaegerszeg.
Central Hungary’s growing share
Looking at all started construction works, Central Hungary and the western regions of Hungary closed 2020 with almost the same Activity Start value as they did in 2019, with the indicator even slightly growing. But in the eastern regions, the total value of projects entering construction phase plunged (by 41%) with the decline occurring mostly in the second half of 2020. Thus, Central Hungary and the western regions increased their share in the value of started construction works, while the share of eastern regions went down to 25%, according to the latest EBI Construction Activity Report.
2021 might be a better year for the multi-unit segment
The pandemic-related economic downturn, combined with the resetting of the VAT rate to 27% as of early 2020, resulted in a remarkably low Activity Start in the multi-unit housing market last year. The last half of 2020 recorded such low numbers that can only be found in the years 2014-2015. However, the newly introduced 5% VAT rate from this year on could halt the plunge and even generate growth in the segment, which would allow the market to return to much higher Activity Start numbers this year.
When looking at Activity Completion indicators, we get a completely different picture as the total value of completed projects last year amounted to a record high of HUF 424bln. This is 40% higher than the previous peak in 2019 and it doubled compared to 2018. Preliminary data for 2021 are expected to have a similarly high value in completed projects.
The 40% countrywide decline in the Activity Start of multi-unit housing was uneven in the regions. In Budapest, the value of projects started in 2020 went down by only 9% against 2019. However, in all other regions the decrease was more than 40%, while in Pest county it was 85%. Due to these tendencies, regional shares have also changed. Because of the importance of Budapest, more than two thirds of the value of the started multi-unit construction works was concentrated in Central Hungary. The western and eastern regions remained well below their multi-year average.
Growing mood for hotel construction, stagnant Budapest
Last year also exceeded the record high value of 2019. In 2020 hotel construction works started on HUF 91bln, a 6% increase like-for-like. The last quarter of last year was outstanding with HUF 36bln of Activity Start registered, according to the latest EBI Construction Activity Report. However, this amount was distributed differently than in previous years between the capital city and rural areas. While there was a roughly 50%-50% share in 2019, in 2020 Budapest only had a 13% share and the rural Activity Start accounted for 87%. Such a low value has not been registered in the capital city since 2016. This is in sharp contrast to the 82% rural annual growth but even in this case, there are major regional differences. In 2020, the two regions pulling the segment were northern Hungary and the Lake Balaton area. For example, at the end of last year, the construction of Hotel Hévíz (Hévíz) and the Hampton by Hilton hotels (Budapest) started. Earlier last year the construction of Minaro Hotel Tokaj, Green Resort Balatonfüred and BalaLand Hotel began.
In 2020, the value of completed hotel construction works also continued to grow, with a total of HUF 48bln worth of hotel completions (a 33% increase). Regionally, the capital city had a higher share in the total value of completed projects (two-third) than in the case of started ones. This year is also expected to see a growth in completions and hotels could be completed at an even higher value.
Completed projects last year include Botaniq Castle (Tura) and Kozmo Hotel (Budapest), while works are expected to be completed in the first half of this year in Budapest for Matild Palace, InterCity Hotel and B&B Hotel. In the countryside Mária Valéria Hotel in Esztergom, Erzsébet camps in Fonyódliget and the youth sports accommodation in Felcsút can reach completion.
Soaring education-related projects
In 2020, construction works on educational buildings started at an outstanding value. Although the peak of HUF 140bln in 2018 was not achieved and fell short of the value of 2019 by a few percentages last year, it is the third most successful year with projects having started on HUF 120bln, far exceeding the average of HUF 44bln in 2000-2016. For example, 2020 saw the start of construction in EMC Measurement Lab server center in Budapest on HUF 16bln, the Semmelweis University Faculty of Medical Sciences, Department of Traditional Chinese Medicine and St. Angela Franciscan Primary School and Grammar School, and the University of Debrecen Innovation Center and Learning Center. The renovation and expansion of the Szeged Medical Sciences Training Block can start at the beginning of this year.
Education-related construction projects amounted to HUF 102bln in Hungary in 2020, and the outstanding trend of recent years can also be felt in completions. For example, the construction of the partly R&D center Univerzum Office Building in Budapest, the renovation of the campus of the Faculty of General Medicine of the University of Pécs and the reconstruction of the Ludovika Wing Building, as well as the construction of the Rózsakert Demjén István Reformed High School were also completed. In the short term, even more projects may reach completion with several of them being in Pest County. In Érd, the renovation of Batthyány Sports School and Primary School and the vocational training center of Kós Károly Vocational High School, as well as the construction of Fenyves-Parkváros Public Education Center and the construction of a primary school in Biatorbágy are planned.
In previous quarters the analysts of EBI Construction Activity Report broadly discussed the negative effects of the pandemic on the domestic construction industry. The latest figures also suggest that there is still no improvement in the sector after a weak first half of the year.
EBI Construction Activity Report Q3 2020
In the first three quarters of 2020, construction works started at a 20% lower value than in the same period of 2019, even though the beginning of the year got off to a good start in construction. The value of Activity Start indicator stood only at HUF 1,484 billion, the lowest amount in the last 4 years. Between July and September, less than HUF 390 billion worth of construction projects started, which is also a negative record because since Q4 2016 we haven’t seen such a low Activity Start in Hungary. Compared to Q2, there was an 18% slump between July and September, according to EBI Construction Activity Report.
EBI Construction Activity Report examines the situation of domestic 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 sector as well. It is prepared by Buildecon, Eltinga (creation of indicators and development of algorithms for aggregation) and iBuild (project research and project database). Full publications can be purchased at firstname.lastname@example.org.
In the first 9 months of 2020, 42% of construction works started in Central Hungary and 30% in Western Hungary, so works started in both areas at a higher rate than the average of previous years. Looking at Q3 alone, Western Hungary’s share is outstanding (45%) due to the launch of several major projects such as the one for Main Road 83 (Győr-Pápa).
Although Q2 saw higher numbers in civil engineering than Q1, Q3 registered another drop in Activity Start. Thus, overall, construction projects in the subsector started in a significantly smaller value in the first 9 months of 2020 than in the same period of 2019. Against the first three quarters of 2019, the value of started construction works was 36% lower. The Activity Start indicator accounted for HUF 470 billion (out of which only HUF 145 billion between July and September). Considering the past 3 to 4 years, figures for the first three quarters are rather weak. It was only in 2015-2016 when the value of projects entering construction phase was lower. In the first 9 months, road and railway as well as non-road and non-railway civil engineering segments were characterized by the same drop as in the previous year. Among civil engineering works, for example, construction phases 1 and 2 of Main Road 83 started in Q3.
Building construction did not improve in Q3 either. Between July and August projects started at a lower value than in Q2, totalling HUF 244 billion – the lowest level since Q4 2016. According to EBI Construction Activity Report, the value of Activity Start indicator amounted to HUF 1 billion for the first 9 months of the year (a 10% shrinkage like-for-like).
The rate of decline was bigger in case of multi-unit housing construction:January and September 2020 saw a 35% lower value of started such projects like-for-like. In case of non-residential buildings, the difference was only 3%, which was mainly due to the high numbers in Q1. The Activity Start indicator in Q2 (which was low compared to the last three years) was followed by an even weaker Q3. Yet, larger projects did start in this period. For instance, among non-residential projects Q3 2020 saw the start of Phase II of the University of Physical Education in Budapest (sports hall and underground garage: Csörsz block), renovation works of Csokonai National Theatre and Latinovits Theatre (Debrecen), Phase III of BalaLand FamilyPark (Szántód) and the revamp of Allee shopping centre (Budapest).
Even compared to the previous weak quarters, Q3 2020 brought a deteriorating Activity Start for multi-unit housing construction. Projects entered construction on a value of only HUF 21 billion, a level not seen since 2014, and the low number of projects already evoked the low levels of 2013 during the crisis. No wonder that figures for the first 9 months have been a multi-year negative record since 2015, with Activity Start amounting to only HUF 154 billion.
Q3 2020 also saw a record broken for completions of multi-unit housing projects, with homes never being completed in such a high value as in July-September. The value of Activity Completion indicator was HUF 122 billion. This peak is estimated to be broken in Q4 with the value of Activity Completion being HUF 193 billion, according to EBI Construction Activity Report.
But the announcements in recent weeks that affect the housing market may bring major changes in the segment. Although resetting the VAT rate on new homes from 5% to 27% this January largely contributed to this year’s dramatic drop in Activity Start, the VAT rate is set to fall back to 5% from next January in case of constructions that start until the end of 2022. Moreover, families can even be exempted from paying the 5% VAT. The new regulations are set to kick-start projects again, so the analysts of EBI Construction Activity Report expect a considerable improvement in the Activity Start indicator.
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 email@example.com.
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.