A Boston Consulting Group (BCG) idén februárban publikált egy tanulmányt a tavaly felülvizsgált EU-s EPBD irányelv apropójából, amelyben az energiahatékony anyagok és technológiák iránti jövőbeli keresletet modellezte. A tanulmány szerzői: Johannes Blauhuth, Lorenzo Fantini, Martin Feth, Jannik Leiendecker, és Alberto Pizcueta. Kőrösi Péter (ELTINGA) összefoglalója.
Klímasemleges új épületek az EU-ban 2030-tól
A klímavédelem célkeresztjébe került a legnagyobb energiafogyasztó Európában: az építőipar. Európa szén-dioxid-kibocsátásának több mint egyharmadáért az épületek felelősek, ami összefügg azzal, hogy energiahatékonyságuk átlagosan igen alacsony. Emiatt az épületállomány dekarbonizációja középtávú uniós irány – már rövid távon is érzékelhető célkitűzésekkel.
Az Európai Unió célja a fosszilis tüzelőanyagok fokozatos kivezetése és a megújuló energiaforrások elterjedésének felgyorsítása, ezért tavaly májusban felülvizsgálták az épületek energiahatékonyságáról szóló irányelvet (Energy Performance of Buildings Directive – EPBD). Az új irányelv előírja, hogy a 2030-as évek elejére az épületállomány legrosszabbul teljesítő elemeit fel kell újítani, 2035-re pedig a lakóépületek energiafogyasztását 20–22%-kal kell csökkenteni. Továbbá 2028-tól minden új középületnek, 2030-tól pedig minden egyes új épületnek zéró kibocsátásúnak kell lennie.
A tagállamoknak 2026 májusáig kell átültetniük az irányelvet a nemzeti jogrendbe.
A BCG előrejelzése az energiahatékony építési technikák és anyagok iránti keresletre
Az új irányelv várhatóan már a következő negyedévekben hatással lesz az európai építőipar működésére. Bár a nemzeti szabályozás kidolgozása némi időt vehet igénybe, az első lépések már befolyásolhatják a befektetői döntéseket és a közbeszerzési szabályokat, különösen a középületek és az energetikai felújítások esetében.
Ha az EU-s célok teljes mértékben teljesülnek, jelentős felújítási hullámra számíthatunk és a zöld építkezés is fellendülhet. A BCG előrejelzése szerint a modern szigetelőanyagok és a nagy hatékonyságú ablakok iránti kereslet évi körülbelül 10%-kal, míg a hőszivattyúk és napelemek iránti kereslet évi 6-8%-kal bővülhet.
A lenti ábra a keresletet modellezi az EPBD-célok teljes megvalósulása esetén, mely 2035-re 70 milliárd eurós piaci volument jelent Németországban és 415 milliárd eurós piaci volument az EU-ban.
Az EPBD célkitűzéseihez időben alkalmazkodó vállalatok előnyre tehetnek szert versenytársaikkal szemben az egyre szigorúbb energiaszabványok és a fenntartható építési trendek környezetében.
Forrás: Boston Consulting Group (BCG), White paper: The building sector and EPBD – Demand impications for energy-efficient materials and technologies, February 2025 by Johannes Blauhuth, Lorenzo Fantini, Martin Feth, Jannik Leiendecker, and Alberto Pizcueta.
EECFA released its 2024 Winter construction forecast on 16 December. Check out a sample report and purchase any of the 8 reports or the package of 8 reports at eecfa.com. For discounts, contact us.
Southeast European construction markets
Total construction output in Bulgaria is forecasted to grow by an average of 3.3% in 2024-2026, which is slightly above real GDP growth projections for the same period. The subsector breakdown shows that residential construction is expected to lose momentum, but this is likely to be compensated by a more dynamic performance of non-residential construction and civil engineering. In parallel, general economic activity in Bulgaria in the forecast period is to be influenced by the effects from the full membership in the Schengen area from 2025 onward and the prospects for the country to introduce the euro on 1 January 2026.
Croatian building construction presents a varied picture across subsectors, with anticipated output growth ranging from significantly positive to somewhat negative. Civil engineering is more uniformly positive, but certain sectors show the effects of the completion and commencement of large projects. Both building and civil engineering output growth will be strongly influenced by new government laws and regulations, the consequences of which, while likely to be large, are difficult to predict for both the short and medium terms. These include the new National Housing Policy Plan until 2030, the new tax on real estate and measures to balance the playing field between different types of tourism accommodations.
Despite the rise in investment, Romania will likely continue to see a stifled growth in construction in real terms due to costs remaining high. Stubborn inflation and the slightly disappointing macroeconomic performance combined with increased wages and still high interest rates create a less appealing environment for investors in building construction. On the bright side, high income and importsare indicative of strong demand for consumption and could translate to demand for construction. While infrastructure did well, the current political turmoil and uncertainty could hobble performance going forwards. Even assuming deficit remains high but stable, as the EC expects, it would continue to raise public debt and make financing further projects more politically difficult. As some downside factors could improve by then, construction growth is forecasted to return to positive in 2026.
Serbia’s construction is likely to have closed another strong year led by civil engineering, but non-residential also entered a new growth cycle with positive outlook boosted by public investments and the hosting of the EXPO 2027 in Belgrade. The construction of commercial, office and hotel buildings are all set to grow in the coming period, followed by education and health. Residential construction is already on historically high levels with a relatively stable performance. In civil engineering, road and railway construction continues unabated, breaking new record volumes on the way, but other segments also have an impressive project pipeline. The economy is set to expand by 4% in 2024 and 2025 on the back of strong consumption and high investment, so construction outputs may sustain formidable levels up to 2026.
Slovenia’s construction sector is expected to maintain post-pandemic levels with annual output consistently exceeding EUR 5 billion up to 2026 against the EUR 3 billion pre-pandemic. Public financing has been a key driver with national budget expenditure up from EUR 10 billion in 2019 to over EUR 15 billion in 2024, though there will be spending limits in 2025-2026. Civil engineering in the forecast period will be supported by major infrastructure projects. Residential construction is set to drop slightly first in 2024 before rebounding by 2026 driven by lower mortgage rates. Non-residential construction is forecast to grow steadily but remain dependant on the availability of public financing. Other challenges remain such as labour shortages, permit backlogs and high costs, but construction cost growth is set to stabilize at under 3% annually.
Eastern European construction markets
In 2024, the Russian construction industry fared better than previously expected driven by the high pace of project implementation and the massive budget support in civil engineering and non-residential construction. It could even offset the negative impacts of the decline in housing construction caused by the end of the mass preferential mortgage program. However, this positive momentum is expected to gradually fade owing to the tight monetary policy of the Central Bank and several other internal and external factors that are slowing down the economy in general and the construction industry in particular. In 2025-2026, the record budget expenditures planned within the framework of new national projects and other measures of state financing will likely maintain construction market volumes in Russia in the positive territory, but with minimal growth.
In Türkiye, increased interest rates and the Central Bank’s policy to reduce the depreciation of the national currency to curb inflation has not yet produced the intended outcomes. And high interest rates are blamed for shrinking industrial output and decelerated trade growth. The interest rate and the Central Bank’s policies had two major effects on the construction sector: big negative real rates of change in construction costs and housing prices. Housing sales are growing as real prices drop and rely on equity financing since mortgage loans have become unaffordable at high interest rates. Building permits in most segments decreased in Q3 2024, while completions had a positive trend. The government’s legal obligation to rebuild the earthquake-damaged 350 thousand buildings with 870 thousand independent units has been the main factor in huge budget deficits that impede the Government from providing sufficient funds for civil engineering projects.
As a consequence of the war ongoing for over 1000 days, Ukraine’s construction market is facing economic difficulties, limited resources, huge losses in buildings, hike in building material prices, lack of skilled workers and limited access to financing, topped with the unpredictability of government decisions and the instability of property rights. The destroyed homes of more than 1.5 million families create a huge demand. Non-residential construction also focuses on the restoration of destroyed buildings and the construction of new ones in safer central and western regions. Civil engineering is also boosted by the renovation of bridges, roads, railways, pipelines, communication and power lines. The ‘Unified portfolio of public investment projects’ recently approved by the government includes 750 big reconstruction projects on roughly UAH 2.36 trillion, while the state budget also has UAH 256.1 billion for public projects in 2025. First, the EUR 50 billion under the EU’s Ukraine Facility are to be used. Financing is also planned through international financial organizations and foreign governments. The priority is energy, transport, utility and public buildings such as schools.
According to the Q3 2024 EBI Construction Activity Report Hungary, after Q2 brought a decline in the value of started construction projects, in Q3 a further decrease followed. Since 2016, the Activity-Start of less than HUF 360bln between July and September has been a new negative record, even at current price.These weak numbers were not even offset by the better Q1 and Activity-Start accounted for slightly more than HUF 1800bln. The value of projects entering construction between January and September 2024 was nearly 17% lower than in the same period of 2023.
Photo by Hajnalka Hurta
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 Eltinga, Buildecon (creation of indicators and development of algorithms for aggregation) and iBuild (project research and project database). For purchasing the full report, please write to us.
Shrinking Building Construction Activity-Start
Q3 saw a continued decline in Building Construction Activity-Start with only HUF 310bln worth of started works. Except for the pandemic year of 2020, only 2017 and earlier years saw lower quarterly numbers. Looking at the first 9 months of this year, the value of started construction works was slightly less than HUF 1360bln, 15%-22% lower than in the same period of 2021-2023. At constant price, the drop was even more considerable: since 2014 there has not been a lower Activity-Start in the first three quarters than this year.
Multi-unit housing constructions posted a slight decrease in Activity-Start in Q3, but non-residential projects registered a larger drop with only HUF 200bln worth of projects entering construction phase between July and September. In the first 9 months, the Activity-Start of non-residential constructions was around HUF 1000bln, 21%-27% lower at current price than in the same period of 2021-2023. At constant price, the last time the number for the first three quarters was lower than this year’s was in 2014.
The largest construction projects launched between July and September 2024 included Lidl’s logistics center in Kiskunfélegyháza, HelloParks Páty PT5 logistics hall, Pick’s production plant in Szeged, Intretech’s plant in Kapuvár, Rheinmetall’s hydrogen and e-mobility parts production plant in Szeged and IGPark’s logistics hall in Debrecen. The construction of the hotel in Kígyó street in Budapest also started. Out of the 10 biggest projects in the quarter, 5 were multi-unit residential buildings or dormitories.
Civil engineering Activity-Start hits rock bottom
There was a further decline in civil engineering after Q2, Activity-Start in Q3 was only less than HUF 50bln – a new negative record of the last 8 years. But in terms of Activity-Start in the first 9 months, the 2024 result is not much better either. The value of construction works started in the first three quarters at current price has not been lower than this year since 2016, while at constant price it was the negative peak of the last 10 years.
Compared to the same period in 2021 and 2023, Activity-Start between January and September this year was 22%-24% lower, while it was only a little more than a third of the exceptionally high 2022.
Within civil engineering, only a negligible railway construction project started in Q3, and the value of road construction projects was also very low. In the first three quarters, road and railway construction accounted for roughly 45% in Activity-Start, their value slightly exceeding HUF 200bln.
Due to the rather low civil engineering activity, hardly any civil engineering project could get into the list of biggest projects. Only the wastewater projects in Dejtár agglomeration and the Rétság agglomeration are worth mentioning.
Budapest leads still
Looking at the last 4 quarters, 39% of all started construction works were in Budapest. The second largest Activity-Start was characterized by the Northern Great Plain (14%), followed by the Southern Great Plain and Pest County (12%). Northern Hungary and Southern Transdanubia recorded the lowest value of started construction works with their respective share of around 5%.
Multi-unit construction works are keeping up
Even though somewhat fewer multi-unit housing constructions started in Q3 than in Q2, Activity-Start significantly exceeded Q1. Construction works started in the segment on slightly more than HUF 100bln. Looking at the first 9 months of the year, there was an overall higher Activity-Start at current price than in the same period of 2019-2023. The value of projects entering construction was roughly the same as in the same period of 2022. At constant price, the Activity-Start for the first 9 months of this year outstripped the first three quarters of 2023; yet it was the second lowest since 2016.
This suggests that developers are still cautious with project starts even though this year’s demand for new homes increased compared to last year’s. Based on housing market trends, supply is expected to grow. A strengthening demand and rising prices may encourage more investors to start projects, and thus Activity-Start in multi-unit construction works may also increase in the future.
In Q3 the value of completed multi-unit housing buildings continued to drop, barely surpassing HUF 60bln. At the same time, in the first 9 months, approximately HUF 265bln worth of such buildings were completed, a slight rise over the same period last year. For the time being, a larger volume of homes is expected to reach completion in the last quarter, however, due to project delays, some may only be completed next year.
The biggest share of multi-unit residential constructions still started in Budapest. Based on the data of the last 4 quarters, the share of the capital city was around 60%. Eastern Hungary accounted for 14% of the Activity-Start, while Western Hungary for 24.5%, up from the previous quarters.
Central Transdanubia
Activity-Start in Central Transdanubia was roughly HUF 40bln in all three quarters this year. Thus, in the first 9 months, construction projects started at a total of HUF 123bln, a major drop compared to the same period of previous years. In the first 3 quarters of 2023, Activity-Start in the region was almost HUF 200bln, while in the first 3 quarters of 2022, it reached around HUF 300bln.
After the weaker Q1, Activity-Start for building constructions in Central Transdanubia in Q2-Q3 was roughly at last year’s levels. Thus, overall, the value of projects entering construction was around HUF 100bln in the first 9 months of this year, lower than in the corresponding period in 2023, and particularly lower than in the same period of 2021-2022.
The outstanding building construction Activity of 2021-2022 was boosted by the start of several big-league projects in 2021 (SK On’s battery factory in Iváncsa, Alba Aréna multifunctional hall in Székesfehérvár) and in 2022 (Kovács Katalin National Kayak-Canoe Sports Academy, the renovation of the church buildings in the castle quarter of Veszprém).
Projects entering construction phase between January and September 2024 in the region included the Huayou Cobalt-Bamo cathode factory in Ács and Phase 3 of Campus Lane Condo in Székesfehérvár.
In the first 9 months of 2024, hardly any civil engineering projects started in Central Transdanubia and the value of started works only reached a bit more than HUF 20bln. Among major civil engineering projects this year only Phase 1 of the dam between Mária-Valéria Bridge and Prímás island ramp can be mentioned. Last year bigger-value civil engineering projects started in the region in Q3 and Q4, for example, several water utility or wastewater projects, and the Biatorbágy-Szárliget railway line.
Original article: Tünde Tancsics (ELTINGA); English version: Eszter Falucskai (Buildecon)
As per the latest EBI Construction Activity Report Hungary, in the second quarter this year started construction works barely exceeded HUF 400 billion – the lowest quarterly Activity-Start even at current prices since 2016. But due to the exceptional Q1 value, H1 2024 overall did not show a massive decline (only -11%) over H1 2023. Compared to 2021, however, the drop was 18%, and against the exceptionally good H1 2022, the decline was a whopping 45%. And at constant prices, Activity-Start was the negative record of the past 9 years.
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 Eltinga, Buildecon (creation of indicators and development of algorithms for aggregation) and iBuild (project research and project database). For more details on how to obtain the full report, please contact us.
Lowest quarterly value of started building construction works since 2020
As per EBI Construction Activity Report Hungary, Q1 2024 saw a high Activity-Start but was followed by Q2 that recorded a decline in buildings as well. The value of started building construction works did not reach HUF 360 billion – the lowest quarterly figure since 2020. Overall, the subsector was characterized by a weaker Activity-Start even in the first half of the year: compared to H1 2023, the value of started construction works dropped by 11.8%, while over the same period of 2022 and 2021, at current prices, the decline was almost 30% and 21.5%, respectively. At constant prices, only H1 2014 was weaker than H1 2024.
Most of the decline occurred owing to the more moderate non-residential project starts. The decrease in multi-unit residential buildings was much smaller and the value of started construction works was roughly at the level of Q1. In non-residential buildings, Activity-Start was slightly higher than HUF 260 billion between April and June this year (a drop of almost 43% over Q1) but was also much lower than in the same period of the previous 3 years. Looking at individual quarters between 2021 and 2023, this year’s Q2 was the second lowest at current prices, and at constant prices, it was the lowest value since 2013. Due to the weaker Q2, Activity-Start in H1 2024 was also lower than in the same period of the previous 3 years at current prices. At constant prices, it was only H1 2014 that saw a lower value.
Biggest-league building construction projects launched in Q2 this year comprised the construction of MBH Bank HQ in Budapest, Phase I of BYD electric car factory in Szeged, and Huayou Cobalt-Bamo cathode factory in Ács. The construction of Moxy Budapest Downtown (hotel) and that of several multi-unit residential buildings also began.
The value of civil engineering project starts hit rock bottom in Q2
The stellar numbers in Q1 were followed by a massive decline in Civil Engineering Activity-Start of EBI Construction Activity Report Hungary between April and June this year. Q2 brought minimal civil engineering project starts, and the value of started works did not reach HUF 70 billion – the lowest quarterly value since 2016. However, comparing the first half of the year with previous years, 2024 is not exceptionally bad. The value of Activity-Start was 10.5% and 9% less than in the same period of 2023 and 2021, and it even exceeded that of 2020. There was a major drop only compared to the outstanding figures between January and June 2022. Within civil engineering, in H1 2024 road and railway construction works accounted for around 45% of Activity-Start and their value did not go up to HUF 200 billion.
It is very telling about the rock-bottom level of Civil Engineering Activity-Start that in the period between April and June this year no civil engineering project could make it to the top 10 biggest started construction projects.
Most construction works continued to start in the capital city
Looking at the past 4 quarters, the largest share of construction works again started in Budapest. The capital city’s share in the nationwide Activity-Start even surpassed 40%. Northern Great Plain had the second largest share, but its 13% was a great drop compared to the 20%-30% of the previous quarters. Pest County came third with 12%, while the smallest share of projects started in Southern Transdanubia with only 5% of launched construction projects in the last 4 quarters.
Practically no change in the value of started multi-unit residential projects
The latest EBI Construction Activity Report Hungary has found that after Q1 2024, in Q2 the value of multi-unit residential construction works started during 3 months was almost unchanged with a total of slightly more than HUF 90 billion. In the first half of this year, Activity-Start in the segment was less than HUF 200 billion, roughly corresponding to the level of the same period in 2021. At constant prices, although in H1 2024 the Activity-Start of multi-unit residential construction exceeded the one in H1 2023, it fell short of the one registered in the January-June period of previous years. It was only in H1 2015 when it was lower. Nevertheless, compared to other construction segments, multi-unit performed much better in Q2: the 10 largest-scale projects entering construction phase included several multi-unit ones, even with just over 100 flats.
The value of completed multi-unit residential construction works shrank in Q2 against Q1, but it stayed high, outstripping HUF 200 billion in H1 2024, making it the strongest first half year recently. Activity-Completion in H1 2024 was almost 42% higher than in the same period of 2023 and even surpassed the record H1 2020 by more than 22%. Further on, Activity-Completion may continue to be high, and, based on expected completion dates, this year may break a new record.
During the last 4 quarters, the largest share of multi-unit residential construction works continued to start in Budapest whose share also grew compared to the previous quarter with two-thirds of Activity-Start. Eastern Hungary’s share was 15.5%, while in Western Hungary 16.6% of such works began.
Southern Great Plain saw some growth in half-yearly Activity-Start
Southern Great Plain also saw some expansion in construction during the first half of this year, even though Q2 brought a decrease after Q1 – as per the latest EBI Construction Activity Report Hungary. Activity-Start here amounted to HUF 126 billion between January and June 2024. Building construction projects contributed most to the Activity-Start of this region: the value of started construction works in H1 2024 was HUF 110 billion – the level of H1 2023. But it was also true for regional building constructions that the higher Q1 values pushed up the half-yearly ones and Q2 brought a more moderate Activity-Start. Within buildings, multi-unit residential buildings represented a minimal level in the region, as in previous years, only 6% of such projects nationwide started here in the first half of the year.
Among the biggest non-residential projects entering construction phase in H1 2024 in the region were Benepack’s packaging materials factory in Makó, Mercedes-Benz battery assembly plant in Kecskemét, and Phase I of BYD electric car factory in Szeged. These projects were also considered large in terms of works started in recent years: in value, between 2021 and 2024 they ranked second, third and fifth, respectively.
Hardly any civil engineering project began in Southern Great Plain this year. Activity-Start in civil engineering in H1 2024 was less than HUF 16 billion – one of the lowest half-yearly results in recent years. Civil engineering works in the region reached an outstanding value in late 2021 and in early 2022 that saw the construction start of the Békéscsaba-Lőkösháza railway line, the Soroksár-Kelebia section of the Budapest-Belgrade railway line, and the Kecskemét-Szentkirály section of M44 expressway whose total value was hundreds of billions of Hungarian Forints and whose construction is still ongoing.
Article: Tünde Tancsics (ELTINGA); English version: Eszter Falucskai (Buildecon)
Written by Tünde Tancsics and Dóra Barát – ELTINGA-EECFA Research
Similarly to every summer, this summer too we have looked at how the European Commission sees our countries. Here is how GDP, investment and construction investment forecast have changed in the past half year.
Between Autumn 2023 and Spring 2024 economic outlook has improved for the majority of countries in the Eastern and Central Eastern European region (EECFA countries) for 2024-2025. Exceptions only included Türkiye, Romania and Hungary (this latter is covered by Euroconstruct), but the deterioration of the outlook was minimal. Expected GDP growth also decreased in case of the EU and the Eurozone.
Economic growth in the examined countries is expected to be between 2.3% and 3.9% by 2024-2025. The largest GDP expansion is related to Serbia, while Russia’s economy may grow least. At the same time, the expansion in the countries of the region is set to be much higher than in the EU and the Eurozone where projected GDP growth is only 1.1% and 1.3%, respectively.
Projected gross fixed capital formation (GFCF) growth rate for 2024-2025 sank in the majority of the countries by Spring 2024 from the previous level in Autumn 2023 with the only exceptions being Russia and Serbia. In Russia, a slight increase was seen from Autumn 2023 to Spring 2024. Prospects in Serbia significantly improved and next to Romania, its growth rate became the highest (6,45%) in the Eastern- and Central Eastern-European region (EECFA countries).
Expected GFCF (investment) growth is also high in Hungary, 4.9%, while for the other countries in the region, projected GFCF increase in 2024-2025 is between 3.05% and 3.6%. In the EU and the Eurozone, a much more modest expansion is estimated than in the region; GFCF prospects decreased from Autumn 2023 to Spring 2024, and they are only 1.15% and 0.85%.
Growth rate for investment into construction for 2024-2025 improved in Croatia, Hungary and Bulgaria, while in Romania, Slovenia, and in the EU and the Eurozone the outlook deteriorated from Autumn 2023 to Spring 2024. When it comes to the EU, growth is foreseen to be close to zero, whereas in the Eurozone a slight drop is projected for 2024-2025. The predicted growth for investment into construction in Spring 2024 was the highest in Romania (8.05%), followed by Hungary, Bulgaria, Slovenia (between 4.1% and 4.4%) and Croatia (2.45%).
This above represents the Commission’s view and it is different from ours at some point. It might be because our focus is exclusively on construction. For each segment we come up with an individual story and this is how the total construction market is formed. The latest predictions are in the 2024 Summer EECFA Construction Forecast Reports. Sample report and order: eecfa.com
As we see, Türkiye and Croatia could be top performers, while Russia and Romania are forecast to shrink. Although the Ukrainian growth rate is impressive it is because the market is coming back from a very low level.
EECFA, our construction forecasting cooperation in Eastern European countries, released its 2024 Summer construction forecast on 25 June.View a sample report and buy any of the 8 reports or the package at eecfa.com. For discounts,contact us.
The expansion phase was over in 2023 in SEE as a whole, but the current contraction is not foreseen to last as long as the latest one after 2008. By 2026 this region could return to around its previous peak. The EE region as a whole is expanding, and we are still optimistic all the way on the horizon.
A closer look reveals that only Romania, the largest market, is behind the overall setback of the SEE region. Here the previous peak is not expected to be reached soon. Elsewhere in the region further expansion is our current view. Serbia’s trajectory is a bit different, but the market could stay at a high level despite the drop next year. Recovery in Türkiye is forecast to be so strong that it could well counterbalance a shrinking Russia. Ukraine is coming back from a very low level, hence the relatively good growth figures.
Southeast European construction outlook up to 2026
Bulgaria’s economy is set to grow by almost 2% in 2024 and 3% in 2025, while the country is heading to a eurozone membership, most likely in 2026. In parallel, construction output is forecasted to decline year on year in 2024-2026 due to expected drop in residential construction and heterogeneous, yet positive performance of the non-residential one. Civil engineering bears a potential for an accelerated growth if EU funds’ absorption bounces back and public investments in infrastructure speed up.
Croatian civil engineering is moving into even higher gear now, especially with the recent update to the TEN-T Network, which greatly benefited Croatia. Accordingly, output in most civil engineering sectors will rise. Building output presents a more mixed picture, with some sectors having reached or come close to peak output, while others are thriving.
The outlook for Romania’s construction sector remains negative this year. Inflation is shrinking, but more slowly than desired, keeping interest rates relatively high for longer and impacting financing costs. Also, the switch between the EU programming periods, combined with still high construction costs and an election year, will mean lower efficiency in starting and implementing long-term projects. Because the macroeconomic outlook is good and if the other issues are resolved, by 2026 construction might start growing again.
Serbia is expecting to see more stabilization in the construction sector this year, with both building construction and civil engineering estimated to stay in the black. The latter is very close to recording a consecutive double-digit growth in 2024. The economy is picking up, interest rates are slowly receding, so there is confidence that construction can sustain high output levels. Demand stays relatively strong, while stable prices are to keep investments high this year.
Slovenian construction is forecasted to surpass its record 2023 output this year and continue its growth trajectory into 2025, exceeding EUR 6 billion for the first time. Major civil engineering projects will likely drive this growth, bolstered by flood reconstruction efforts. Public investment in housing is planned but is contingent on future public funding availability that will also impact non-residential construction. The industry faces workforce shortages, but increased immigration and declining construction costs are expected to mitigate these issues, supporting further growth.
Eastern European construction markets of EECFA up to 2026
In Russia, the increase in people’s solvency, the restoration of business activity and dynamic economic development ensured growth in construction output last year, but recovery trends are slowing down owing to both external restrictions and internal negative factors. The residential and civil engineering construction subsectors remain key for the industry, but their dynamics depend on the level of government participation and the volume of allocated budget funds. Even though negative trend is forecasted for the residential subsector in the coming years, the drop in overall construction output in 2024-2026 is not predicted to be significant as the market will be supported by the construction of export infrastructure projects.
Türkiye’s economy has been greatly affected by last year’s earthquakes that caused great human and material casualties, requiring the rebuilding of destroyed homes, workplaces, and infrastructure. The government’s costly obligations coincide with a return to conventional economic policies that require austerity. Massive reconstruction spendings have caused huge budget deficits and civil engineering is worst affected by this. Increased interest rates have created affordability problems for bank loans, mostly mortgage ones, so home purchases rely mostly on equity financing and serve as a hedge against inflation. Home permits in Q1 2024 rose due to permits issued in earthquake-hit regions. This, and the private sector’s returning appetite in most commercial building segments, aligns with the expected high GDP growth.
Ukraine is making great progress in overcoming the consequences of the full-scale invasion, showing economic growth. The issue of reconstruction is acute, though. The main problems in the market are rising prices and shortage of building materials, growing costs of logistics and a shortage of skilled labour. In energy the immediate restoration of energy generation facilities is required to provide stable electricity. State and international programs for the restoration and construction of housing will likely contribute to the revival of the construction market. In the coming years, the future of the market, more than ever, will depend on three things: results on the battlefield; Ukraine’s subjectivity in the international arena; and the ability to protect its interests against Russian diplomacy.
The value of construction works launched in three months rose in Q1 2024, Activity-Start hasn’t been so high in the last six quarters. EBI Construction Activity Report Hungary Q1 2024 measured the total value of started construction works at HUF 807bln. Looking at the period between 2018 and 2023, there were very only five quarters when Activity-Start surpassed this number. At constant prices, Q1 2024 was also considered good when looking at the period since June 2022. Nevertheless, when compared to the period between 2018 and H1 2022, it fell into the lower range.
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 Eltinga, Buildecon (creation of indicators and development of algorithms for aggregation) and iBuild (project research and project database). For more details on how to obtain the full report, please contact us.
Building construction failed to improve in Q1 2024
Building construction could not regain senses in early 2024: Activity-Start was at the level of the last quarter of 2023. The value of started construction works was slightly more than HUF 400bln, almost the same as between October and December last year, but 17%-26% lower than in the first quarters of previous years. At constant prices there was a decline in the value of started building projects: last time Activity-Start was lower was in Q4 2015.
The Activity-Start indicator of non-residential buildings slightly grew in the first three months of 2024 compared to Q4 2023, thus exceeding HUF 350bln. Yet, examining individual quarters between 2021 and 2023, Q1 2024 was the second lowest. At constant price, the last time Activity-Start was lower than in Q1 2024 was in 2015. In case of housing construction, 2024 started better than 2023, but the value of started construction works continued to drop after Q4 2023.
Biggest building projects launched in the first three months this year mainly included logistics and industrial buildings, like the construction of Mercedes-Benz battery integrating plant (Kecskemét), Weerts Ebes logistics hall (Ebes), Benepack packaging materials factory (Makó), Phase I of Evoring electric car parts factory (Jászfényszaru), building C of VGP Park logistics center (Győr), and the storage hall and HQ of Rossmann (Üllő). Large office projects such as Zugló-Városközpont Office7 and several multi-unit residential projects also started, as well as the construction of Hilton Garden Inn Hotel (mixed-use) and the development of Hungaroring Paddock.
Civil engineering getting back to life
After several weak quarters, civil engineering seems to have improved and Activity-Start in Q1 2024 was nearly HUF 400bln, an increase of roughly 70% against Q1 2023. The improvement was visible in non-road and non-railway constructions and in road and railway ones alike. The former saw a 180% growth over the first quarter of last year, but Activity-Start was more than 50% higher than in the last quarter (which was also stronger). The value of non-road and non-railway projects at current price was last higher in Q1 2017 than in Q1 2024, but even at constant price, it has been the fourth highest Activity-Start since 2020.
In road and railway constructions, the recovery was mainly due to the Ferencváros-Kelenföld railway line 1 project, considered to be the highest-value work started in Q1 2024 in the entire construction sector. The Southern Industrial Park in Nyíregyháza and the flood protection facility in Esztergom were also among the biggest started civil engineering projects.
Budapest took the lead again
Looking at the construction works started in the last four quarters, the highest value ones were in Budapest whose share in total Activity-Start was 36% (the 20%-30% in the last quarters). Northern Great Plain, the leader in previous periods, slipped back to the second place (21% of works started here). Southern Transdanubia had the lowest Activity-Start (its share barely exceeded 5%), Western Transdanubia had a share of 5%, while Northern Hungary had 6%.
Multi-unit residential building still stumbling
Although this year started better than the last one in multi-unit residential construction, the value of such started projects dropped further and was lower than in the last two quarters of 2023. Starting from Q2 2016, the segment registered the fourth lowest Activity-Start in Q1 2024 at current price. Looking at constant price, the value of works started in early 2024 has been the third lowest since 2016.
Yet the market outlook improved compared to the previous year. Mortgage rates sank greatly by end 2023 and continued to do so in 2024, while the economic outlook also became better. The rosier environment has lured buyers back to the residential market with the revival already noticeable in the first quarter of this year, both in the secondary and primary markets. Good news: the reduced VAT rate for new homes has been extended, so instead of end 2024, building permits can be obtained by end 2026 and homes can be sold at 5% VAT until 2030.
Many multi-unit residential projects were completed in the first three months of this year with their value exceeding HUF 120bln, the highest quarterly Activity-Completion since 2021. Many units are expected to be completed this year, too, however, in the long run, the value of completions is set to decrease due to previously shrinking construction works.
Looking at the past four quarters, Budapest accounted for 63% of multi-unit residential projects entering construction phase, and slightly more than 64% of the value of such projects was concentrated in Central Hungary. Eastern Hungary accounted for 14.8% of the Activity-Start, while Western Transdanubia’s share was 20.9%.
Northern Hungary in focus
Although the year started well in the construction industry nationally, it is not true to Northern Hungary where the total value of started construction works did not reach HUF 22bln. It was the lowest quarterly amount in 2018-2023.
In Northern Hungary, both building construction and civil engineering shrank in the first quarter of this year. Building Construction Activity-Start was one of the lowest in the quarters of recent years with the drop clearly attributed to non-residential buildings. Although the value of the started multi-unit residential constructions grew at the beginning of 2024, the region still has a very low willingness to build such buildings (its share in the national multi-unit residential Activity-Start was less than 3% in the last 4 quarters). Low activity in multi-unit residential works is well illustrated by the fact that, despite the improvement, no project made it into the largest construction projects in the region in Q1 2024.
Among non-residential buildings, the biggest regional projects launched between January and March 2024 include Phase II of Horváth Rudolf logistics centre in Hatvan. In recent years the largest ones comprised the logistics hall of Robert Bosch Power Tool MC301 in Miskolc (starting in 2023), the manufacturing plant of GKN Automotive in Felsőzsolca (starting in 2022), Chervon manufacturing plant and the reconstruction of Diósgyőr Castle in Miskolc (starting in 2021).
In early 2024 Civil engineering Activity-Start in Northern Hungary continued to drop. Looking at the period of 2018-2023, the total value of construction works started in Q1 2024 was the third lowest: Activity-Start did not reach HUF 4bln. In Q1 civil engineering projects were not even among the largest started ones. The value of civil engineering projects started in the region was higher in Q2 2023, in Q2 2022 and in Q3 2021 when such projects entered construction phase as the Szentdomonkos-Borsodnádasd section of main road 25, the Sajószentpéter-Berente bypass 260, and the Gesztely-Szerencs section of main road 37. The peak so far in regional civil engineering Activity-Start was Q2 2019 when the construction of sections A, B and C of M30 expressway began.
Article: Tünde Tancsics (ELTINGA); English version: Eszter Falucskai (Buildecon)
Activity-Start, that is, the total value of started construction works, greatly increased (+64%) in 2023 across Romania compared to the previous year. It reached the highest level seen in the past decade, both as gross value and growth rate – according to the EBI Construction Activity Report. Even more impressive is the serendipity that as Activity-Start of building construction began to decline, civil engineering sprang up to cover the difference and more.
What is EBI Construction Activity Report? There was no construction start indicator in Romania, so we have created an estimation for it. It helps you understand what could happen on the market in the coming months. The indicators are based on project information from iBuild project database and are published monthly in the EBI data visualization (for all the 18 segments of the construction market). On top of this the EBI Construction Activity Report Romania is published quarterly with data and explanations. This research is a fruit of the cooperation among Eltinga, Buildecon and iBuild. And this is where the name EBI comes from.
Civil engineering in the spotlight
Residential multi-unit buildings seem to have peaked in 2021 in terms of the Activity-Start indicator. With construction costs rising in 2019, followed by high inflation and interest rates, it seems developers were less optimistic about the market’s short-term outlook and consequently, they started fewer projects.
When it comes to non-residential construction, 2023 saw a slight downturn after a very good performance in the previous year. The main factor was Bucharest where the current issues regarding urban planning, compounded with wavering demand, slowed down the development of new buildings across all non-residential segments, but mainly in the office sector.
With the spending deadline for funding from the EU 2013-2020 programs at the end of 2023, a surge in activity in civil engineering was to be expected, and this also explains why Q4 was milder than previous quarters in terms of the Activity-Start. The projects that had a reasonable chance to reach an advanced stage or to be phased into the new programs were prioritized and started in previous quarters.
Of all the projects that started construction in 2023, one stands out: the 37.4km section (Cornetu – Tigveni) of the A1 motorway will be one of the most complex and expensive road segments build so far in Romania since it crosses the Carpathian Mountains and will require 12km of bridges, tunnels and viaducts. It will also have the longest motorway tunnel built so far in the country (1.7km), nearly five times larger than the current record holder.
Several renewable energy projects were also started in Q4 2023: a 102MW wind energy park in Braila County and a 60MW solar plant in Alba County, signaling a renewed interest in green sources of electricity after the recent volatility in the prices of fossil fuels.
The third spot on the list of the largest projects that began in the last quarter of 2023 is taken by the 12,000-seat Sports Arena in Targoviste. The local football team there (FC Chindia – named after a tower built in the city by Vlad the Impaler) had to play its games on other cities’ stadiums in the four years it was in Romania’s First League as its local arena was considered inadequate.
Less glamorous, but equally important, work was also started in Q4 2023 on the water and sewer networks in Dambovita, Iasi and Brasov counties, part of the ongoing efforts at national level to improve the existing infrastructure and provide increased access to public utilities.
When it comes to building construction, all top projects started in the last quarter of 2023 were residential parks, three of which were in Bucharest (Theodor Pallady residential area, Nusco City Phase 2 and Cortina Elysium, totaling more than 1600 flats) and two more in Sibiu County (Magnolia Residence Phase 2 and a residential complex in Selimbar, adding nearly 1000 more flats).
Bucharest loses the first place in Activity-Start
2023 was an unusually even year regarding the regional distribution of the Activity-Start indicator. Previously, Bucharest-Ilfov took the largest piece of the pie and accounted for around one quarter of the value of construction works started in each year. In 2023, however, it lost its lead because other regions saw major increases in Activity-Start, while it and the Center underperformed compared to the previous couple of years and fell behind. The slowdown in Bucharest was visible across the board with drops in new projects, both in civil engineering and buildings. Infrastructure starts had previously peaked in 2022, and the focus switched to completion, while urban planning issues limit new developments for all segments.
The North East region had a boost moving from the third least active right to the top of the podium in terms of Activity-Start. Likewise, West shot up to the top half from the very last position that it held for four consecutive years.
North West region: steady as it goes
While other regions, as mentioned previously, saw major upward and downward changes in their share of the national started construction works, North West maintained the second place that it usually holds. Behind this veneer of stability, however, lies an uneven evolution of different construction types, the EBI Construction Activity Report suggests. Activity-Start indicator (deep orange on the chart) of the building construction submarket began strong, growing fast in Q1 and Q2, and then it plateaued, while civil engineering had a very different path, having a boom in activity in Q3.
Much of the growth can be attributed to the Cluj Napoca – Episcopia railway electrification (166 km), that in itself accounted for almost 1/3 of the value of all started construction works in North West in 2023. The fastest passenger train on this railway averaged 60km/h, with added delays at the Hungarian border and in Cluj caused by switching locomotives from electric to diesel and vice versa. The new electric line will remove this impediment and allow speeds up to 160km/h for passenger trains and the doubling of the lines will facilitate cargo transit as well.
Other major construction works started in 2023 in the North West include several sections of the much-delayed A3 motorway as well as airport terminals in Cluj, Satu Mare, Bihor and Maramures counties. The region attracted several manufacturing investments with the largest project in the building submarket being the Nokian Tyers factory that started construction in Q2 2023 in Oradea.
Healthcare and education buildings are a rising concern due to the aging stock and limited access to services. Thus, extensions of the emergency clinics in Oradea (5.500sqm) and Bistrita (9.750 sqm) also started in 2023. In the same year, work began on a new private school in Oradea (29 classrooms) and on renovating a university building in Cluj County (10.000 sqm).
Cluj Napoca gained notoriety for its tight residential market. Limited deliveries and high demand have pushed the prices here higher every year, and it’s now the most expensive city in the country for home buyers. Supply is slowly expanding with phases of larger projects like Elite City (279 flats) and The Nest (102 flats) starting construction in 2023. Several multi-unit projects were also completed here in 2023, including Liberty Residential (268 flats) and Seasons by Studium Green (150 flats).
Completions (light orange) in the North West were on an upward trend for the past couple of years with building construction overshadowing civil engineering. This is poised to change starting with 2024 as the expected completion of infrastructure projects started by 2023 could even out the field. However, road and railroad projects in Romania have had a long history of delays, cancelled contracts and legal woes, thus, some caution is in order when looking forward.
During 2023 nearly 30km of motorway on A3 were completed on two sections. However, one of them (Nusfalau – Suplacul de Baracu) is quite isolated, so its usage will be limited until it’s connected to the remainder of the network, in 2025 at earliest.
With good Activity-Start and completions, Output (blue) also had a favorable evolution in 2023 for both buildings and civil engineering. Enforcing the idea of steadiness of the North West, Output showed steady growth in each quarter of the last couple of years, at least at current prices.
The major challenges for the North West region in the upcoming years will be to find new avenues of growth, especially in the building segment, and to secure funding and manage ongoing works for infrastructure construction. To quote Lewis Carroll “[…] here we must run as fast as we can, just to stay in place. And if you wish to go anywhere you must run twice as fast as that.”
Hungary’s construction sector failed to improve in the last quarter of last year; the total value of started construction works shrank against previous quarters. Overall, 2023 registered low numbers and the Activity-Start indicator of EBI Construction Activity Report did not reach HUF 2,500 billion. This means that the total value of projects entering construction phase dropped by a respective 19% and 34% compared to 2021 and 2022, and Activity-Start in 2023 was roughly the same as in 2019. But if we look at the rate of decrease at constant price, it is even more significant: 43%-44% over 2021-2022. The last time the value of Activity-Start at constant price was lower than last year was in 2015, but even 2013-2014 exceeded last year’s.
Building construction works declined in Q4 2023
Even at current prices, the subsector has not produced such a low quarterly Activity-Start as in October-December 2023. Thus, the lower numbers of the first 9 months did not improve, and for the whole year, building construction works started at less than HUF 1,750 billion: 19% down from 2021 and 23% down from 2022. At constant price, the Activity-Start indicator for 2023 was 44% and 34% lower than in the previous two years. Only 2015 witnessed a lower Activity-Start than 2023.
Within building constructions, Activity-Start decreased in multi-unit residential buildings and in non-residential ones, too. In the latter, Q4 lagged dramatically behind the quarterly numbers of previous years. Last time the value of non-residential buildings entering construction phase in a quarter at current price was lower than that was in 2016. For the whole year, the Activity-Start indicator of non-residential buildings sank by 17% and 22.5%, respectively, over 2021 and 2022. Filtering out the change in prices, the lag is even greater: the level of Activity-Start at constant price in 2023 was 42% and 33% lower than in the previous two years. It was only in 2015 when lower numbers were registered.
The biggest building construction projects launched in Q4 2023 were several logistic facilities and warehouses (HelloParks Páty PT3 logistics hall; Phases 1 and 2 of LG Magna manufacturing plant in Miskolc; ZF Chassis Modules Hungary vehicle assembly plant in Kecskemét; ZF Chassis Modules Hungary manufacturing plant and warehouse in Debrecen). In addition, the project of the Hódmezővásárhely Military Secondary School and Dormitory, the renovation works of the Chemistry building of the Faculty of Science of Debrecen University, as well as Phase 1 of the renovation works of buildings B1, B2 and C of the University of Veterinary Science in Budapest started.
Civil engineering stagnated at a low level
Although there was no further drop in civil engineering, its Activity-Start was very low in Q4 2023 with about the same value of started constructions as in Q3. Thus, Civil Engineering Activity-Start in 2023 massively dropped against 2022 (a year considered an outlier), but the value of the started works did not reach the 2021 level either; and it turned out to be somewhat lower than in 2020. In 2023, there was a 17% drop in the subsector against 2021, and a 50% shrinkage over 2022. The constant-price decrease was even greater: almost 60% over 2022 and more than 40% over 2021. Between 2013 and 2023, at constant price, only the Activity-Start of 2015 was lower than that of 2023.
Hardly any road and railway construction works started in Q4 2023, while much more other civil engineering works entered construction phase. In 2023, road construction works started at a higher value than in 2020-2022, but railway construction works fell greatly last year: here Activity-Start at current price was only lower in 2015. Thus, overall, during the year, the Activity-Start of road and railway constructions was around 19% lower than in 2021, while it was almost 60% less than in 2022 (a year considered outstanding).
The largest civil engineering projects in Q4 2023 were mostly related to water and sewerage in Tolna and Bács-Kiskun counties, in Adony and Ercs regions, in Tamási and vicinity, in Várpalota and vicinity, as well as in Csemő, Cibakháza, Nagykőrös, Tiszafüred, Jászszentandrás, Tápiószőlős and Kengyel.
Most project starts are still in Eastern Hungary
In the past four quarters the biggest share of construction projects started in Eastern Hungary with the region’s share in Activity-Start being 42%. Budapest accounted for 26% of the value of projects entering construction phase. After Budapest, Northern Great Plain had the second highest share, 25%, followed by Central Transdanubia and Pest County with 10% alike. In the last 4 quarters, 21.5% of construction works started in Western Hungary, and 36% in Central Hungary.
Sunk interest in building multi-unit homes
After the promising numbers of Q2 and Q3 last year, there was another decrease in the Activity-Start indicator of multi-unit residential buildings. During the whole 2023, the value of such started constructions did not reach HUF 300 billion (-28% against 2022 and -30% against 2021). If we look at the period of 2017-2022, it only exceeded the level of 2020, however, at constant prices, the value was lower in 2023 than in 2020 (a year when the pandemic hit and VAT on new residential units was set back to 27% from 5%). It was only in 2015 when the value of started multi-unit residential constructions was lower. Compared to 2022, at constant prices, the decrease was 38%, and compared to 2021, it was more than 50%, as per the latest EBI Construction Activity Report.
This year brought major changes in state subsidies for home purchases. From 1 January, in cities only those planning to have additional children can receive CSOK+. Those who do not have additional children are only eligible for the village CSOK in beneficiary settlements. The so-called Baby Loan, although it remains available for married couples having a child, have more stringent rules. The new CSOK+ does not include a direct non-refundable support at the time of purchase, a bigger discounted loan can be applied for, and non-refundable support can only be obtained upon the birth of the 2nd and 3rd children when part of the outstanding debt is released. The new system does not differentiate between the purchase of used and new homes, making the previous advantage of new homes disappear. In addition, in case of CSOK+, one can no longer use VAT refund when buying a new home.
On a positive note, the money to be claimed has been raised, so it can be of great help in case of higher-priced new homes. Also, this year interest rates on market loans have greatly decreased compared to the beginning of last year, and it is expected to continue, so demand may recover in the new market, which may also improve the prospects of developers, encouraging the start of more projects this year than last.
In 2023 the value of Activity-Completion indicator in multi-unit housing exceeded HUF 350 billion, representing an increase of almost 28% compared to 2022, and surpassing the level of 2021 by 23%. This year also expects to see high numbers.
Although the biggest share of such constructions still started in Budapest, the capital city’s share in Activity-Start in 2023 slightly dropped over 2022. In total, around 60% of constructions started in Central Hungary, slightly more than 15% in Eastern Hungary, while the share of Western Hungary was a bit over 24%.
Western Transdanubia
Last year around 6% of started construction works concentrated in the Western Transdanubia region, the same as in 2022. Although due to the declining Activity-Start countrywide this meant a much lower value of started constructions than the year before, the drop was 34%. In 2023 Activity-Start in the region was lower than in previous years (-34% compared to 2021 and almost -44% below the 2020 value). The previous peak in the region was in 2018 when several large-scale projects were launched: M85 highway, M8 highway, and the section of main road 76 between M7 highway and Keszthely, and a stretch of M15 highway between M1 and Rajka.
The value of started building constructions in Western Transdanubia shrank last year; over 2022 there was a 34% drop, while compared to 2021 the decrease was 41%. The projects launched in 2023 included warehouses and factories, for example, the Nestlé Purina pet food production plant and warehouse in Bük or the Velux GP4 production hall in Fertőszentmiklós.
Civil engineering works were also at a low level in 2023 (-32% against 2022, but only an 8% drop compared to 2021). In 2023, only one regional civil engineering project made it to the larger projects; Phase 3 of the Zalaegerszeg vehicle test track. The last time a hike was registered in civil engineering was in 2018 thanks to large road projects.
Recent years have seen a declining Activity-Start in building construction works in Western Transdanubia. At the same time, Activity-Completion has exhibited growth; for instance, 2023 was a record year for the value of completed building construction projects. Projects that reached completion last year comprised several plants of Nestlé Purina, the Water Adventure Park in Győr, Sirius Hotel in Keszthely, and Buildings A1, A2, A3 of VGP Park Győr Béta.
Original article: Tünde Tancsics, ELTINGA – English version: Eszter Falucskai, Buildecon
EECFA, which celebrates its 10th anniversary this year, released its 2023 winter construction forecast on 15 December 2023. The new reports can be purchased, and a sample report can be viewed at eecfa.com.
No clear direction in the Southeast European region of EECFA; 2024 is foreseen to experience a decline, but a comeback is our current scenario for 2025. Expansion is projected to prevail all the way until the end of the forecast horizon in the East European region.
Romania is expected to contribute most negatively to the shrinkage of the SEE region in 2024. The rest of our countries is forecast to perform better. Bulgaria, Croatia and Serbia could end up at higher level in 2025 than what was experienced in 2023. Upswing in Türkiye is envisaged to pull the EE region up and we still believe that shrinkage in Russia is about to come. Not a particularly strong, but recovery is projected in Ukraine.
Construction outlook up to 2025 in Southeast Europe
Bulgaria’s economy is expected to lose momentum in 2023 that will translate to a lower, yet positive growth in 2024. Against this backdrop, construction output is to follow this trend with heterogeneous performance on segment level. While in the forecast period till 2025 civil engineering and non-residential construction will likely contribute with positive growth figures, after several strong years, residential construction is predicted to witness a new normal with negligible annual growth rates from 2024 onwards if any.
Croatia’s construction output will continue to grow, rapidly in 2023 and less robustly in 2024 and 2025. Civil Engineering construction is poised to become the brightest star in the country’s construction firmament with Buildings showing considerable sector to sector variation, but overall not performing as strongly as in the past.
Romania’s construction is expected to shrink in 2023 in real terms. Economic growth is slowing down under sticky inflation and high financing costs. Further slowdown might come in 2024 as multiple elections, political pressure to lower budget deficit, high social spending and the transition to the new EU programming period would make it challenging to focus on public projects. The outlook doesn’t look better on the private investment side with tight labour market and sluggish consumption growth expected for 2024. By 2025, return to growth is postulated as most of these obstacles may dissipate.
During 2023, Serbia has been performing better than initially expected with the economy picking up in the second half of the year and construction outputs registering another record high. While the construction of buildings is consolidating in a moderate manner, civil engineering surged with a double-digit growth rate. The easing of inflationary pressures is also helping market stabilization, while high interest rates remain a major impediment for growth in short-term.
Slovenia’s construction industry in late 2023 faces economic challenges exacerbated by unprecedented floods in August, causing EUR 10 billion in damages. Despite workforce shortages leading to increased construction costs and inflation, the sector is expected to see a significant rise in output with civil engineering projects, including flood repairs and infrastructure initiatives, driving growth. However, concerns arise over the potential deceleration in growth in 2024 and 2025, mostly in residential and non-residential construction even as reconstruction efforts in civil engineering gain traction.
What to expect in the Eastern European construction markets of EECFA
In Russia, stable government support, a relatively favourable macroeconomic environment, and the general resilience of the industry to external challenges ensured positive dynamics in construction in 2023, making the forecast more optimistic for this year. The industry’s development strategy prioritizes housing construction as well as transport- and energy-related projects. The positive momentum is not predicted to last long, though, and in the 2024-2025 horizon we might observe contraction in construction market volume, mainly due to the expected decline in the residential market which might outweigh the positive dynamics in other subsectors.
Türkiye’s economy has been impacted by two developments with one being the reconstruction of collapsed buildings and infrastructure in recent earthquakes where most tax revenues went, causing large monthly budget deficits. The other one is increasing interest rates. Although the Central Bank increased the base rate from an 8.5 base point level to 40 in six successive months, it couldn’t curb inflation and there are exchange rate rises along with inflation. The construction sector grew at higher rates than the GDP as the national average on the back of building construction in earthquake-hit provinces. Growing interest rates reversed most of the problems caused by the low-interest rate policy, but it also led to an increase in construction cost and hit the affordability of purchasing homes.
Ukraine’s construction market has been struck by the ongoing war. According to official data alone, almost a million flats, tens of thousands of non-residential buildings, thousands of kilometres of roads, railways, bridges and other infrastructural facilities were either destroyed or damaged. The construction industry partially lost its raw material base and production as most metallurgical enterprises located in the south and east were destroyed or occupied. The main construction segments that can predictably develop even during the war are the restoration of damaged housing and social infrastructure, civil engineering, construction and modernization of industrial production.
