iBuild – EECFA – Buildecon

Poor Q1 2023 construction Activity-Start in Hungary

Posted on May 17, 2023May 17, 2023 by efalucskai

Press Release on EBI Construction Activity Report Hungary Q1 2023

Q1 2023 saw very low Activity-Start in the Hungarian construction industry with only HUF 374 billion worth of construction works started, according to the latest EBI Construction Activity Report. Such a low value of construction start within three months has not been seen since 2016. Compared to the outlier Q1 2022, Activity-Start fell by almost a quarter, but compared to the first three months of 2021, the drop was more than 40%. The value of started works seems particularly modest and the extent of falloff particularly large if we consider that the sector has recently experienced massive price changes. At constant prices, it was only in 2012 when a lower volume of construction works started during three months, and the drop against Q1 2021 already surpasses 60% at constant prices.

EBI Construction Activity Report Hungary analyses the construction industry on a quarterly basis, including the volume of newly started construction works and the value of projects completed in each quarter in aggregate and by segment as well. It is prepared by Buildecon, Eltinga (creation of indicators and development of algorithms for aggregation) and iBuild (project research and project database). EBI Construction Activity Report Q1 2023 has been published and can be purchased at ebi@ibuild.info.

Decline not sparing building construction work starts

The value of started building construction projects did not reach HUF 300 billion in the first three months of 2023. It has been one of the most modest quarters in recent years and last time Q2, Q3, and Q4 2020 registered construction starts of a similar value. The decrease in Activity-Start against the first quarters of 2021 and 2022 was 42%-48%. At constant prices, the drop is even more visible: such low numbers were last seen in the segment in 2013-2014.

Both residential and non-residential buildings recorded a decline in Activity-Start. In the former, the value of started construction works stayed below HUF 40 billion, while in the latter, Activity-Start was around HUF 260 billion. At constant prices, these numbers represented the 2014-2015 volumes.

Biggest building construction projects launched in Q1 2023 included several logistics centres like Robert Bosch Power Tool logistics centre in Miskolc, BMW logistics centre in Debrecen, Waberers centre in Ecser, or Blister-Labor-Telemedicina centre in Bicske. The construction of several factories and warehouses also started such as Schneider Electric’s Duna Smart Power System smart factory in Dunavecse, Phase 2 of the Mercedes-Benz body part production plant and Phase 2 of its assembly plant in Kecskemét; another phase of Nestlé Purina pet food production plant in Bük or Rheinmetail ammunition factory in Várpalota. Two large hotel construction projects also began: Sofitel Budapest Chain Bridge Hotel and Movenpick Palace Hotel Budapest.

Few civil engineering works began

Civil engineering Activity-Start continued to decrease after Q2, Q3 and Q4 2022. The total value of started civil engineering projects did not reach HUF 80 billion (the lowest value since 2016), and at constant prices the volume has never been so low in any quarter since 2012.

In road and railway construction, projects started in the value of only about HUF 20 billion, while non-road and non-railway constructions saw an Activity-Start of about HUF 60 billion, roughly the level of Q3-Q4 2021 and Q1 2022.

In Q1 2023 hardly any civil engineering project was among the largest ones. Major projects included the recultivation of the Oroszlány tailings site, the Budapest Freeport project, and the development of Hungaroring’s utility network.

Northern Great Plain ahead of Budapest

Looking at the last four quarters, the highest value of construction projects started in the Northern Great Plain region with a share of roughly 23%. Budapest saw the second highest value of construction starts, while Pest County came third. With this, around 37% of the national Activity-Start was realized in Central Hungary. About 40% of started construction works belonged to Eastern Hungary, while slightly more than 20% of the Activity-Start was connected to Western Hungary with 5% of Activity-Start in Southern Transdanubia.

Hardly any multi-unit housing project-start

The first three months of this year registered very few multi-unit housing project starts. The last time the value of Activity-Start was lower than the current one was in Q3 2020. Before that only the quarters of 2015 saw a similar amount. The drop is even more significant at constant prices: the Q1 2023 level recalls the 2014 volume. In the last quarter of last year several developers decided to launch a new phase of their projects because of which, despite unfavourable market conditions, Activity-Start increased compared to previous quarters. That is why it was expected that the following three months would not be the time for major construction starts. Yet, the two quarters together reported weak figures.

EBI – megkezdett kivitelezési munkák – 2023. április 2.-i állapot

Posted on April 6, 2023April 6, 2023 by janosgaspar

Főbb megállapítások 2023. 2. negyedévéről:

Továbbra is csak az ipari épületek és raktárak szegmens Aktivitás-Kezdése említésre méltó, a többi szegmensben alig indulnak jelentős projektek.
A megkezdett társasházi projektek összértéke is csak harmada az egy évvel korábbinak.
A mélyépítésre is igaz, hogy sajnos nincs igazán miről beszélni. A hatalmas zuhanáshoz ezen a részpiacon az is hozzájárul, hogy a tavalyi első negyedév volt minden idők legjobb negyedéve. Akkor 850 milliárd forint értékben indultak mélyépítési munkák. Most ez egyelőre alig 60 milliárd.

További részletek a friss adatviz-ben. Ha érdekli, kérem a ebi@ibuild.info címre írjon.

A vizualizáció használóinak egy tipp, hogy hogyan lehet csak éves adatokat megnézni:

Main findings on Q2 2023:

The Activity Start of industrial buildings and warehouses continues to be worth mentioning as other segments hardly saw any major project starts.
The total value of started multi-unit housing projects accounts for only a third of the volume a year earlier.
Unfortunately, there is almost nothing to report about in civil engineering, either. Here the huge drop is also due to the fact that the first quarter of last year was the best quarter of all times with started civil engineering works worth HUF 850 billion. Now this has barely reached HUF 60 billion so far.

The above video is a tip on how to view only annual data in the visualization.

Is the Romanian residential construction market cooling down?

Posted on February 24, 2023March 7, 2023 by efalucskai

Written by Dr. Sebastian Sipos-Gug – Ebuild srl, EECFA Romania

This question is quite often asked both by those looking to buy a home and by those building homes. The former are hoping for prices to come down, while the latter are worried that prices will come down. Whereas a definitive answer cannot be given, Dr. Sebastian Sipos-Gug, EECFA’s researcher on Romania, has looked at several factors that might tip the balance of the residential market, one way or the other.

For a more in-depth analysis and forecast you can purchase the latest EECFA Romania Construction Forecast Report at www.eecfa.com. EECFA (Eastern European Construction Forecasting Association) conducts research on the construction markets of 8 Eastern-European countries, including Romania.

Where we are now

Despite a rocky start, real estate sales in 2022 were comparable to those of 2021 (+0.2%, source: ANCPI) and so, at least from this point of view, the market seems to be relatively stable, and could tip either way. In a regional view, the northern half of the country was more likely to see a drop in transactions, and Bucharest remains the most active market, with 1 in 5 real estate sales registered in Romania in 2022 taking place in the capital city.

*Real estate sales in 2022 as a percentage of the 2021 volumes (Source: ANCPI)*

Looking at the longer-term trends, the number of sales in 2022 were 29% higher than those of 2019, but still below the peaks of 2015 (-21%) and 2008 (-31%), and thus it would seem like we are approaching another turning point in the market cycle.

From a house price perspective, there are some signals that asking prices started to go down, however, as of Q3 2022, this didn’t translate in a decrease in official transaction prices. Instead, prices kept rising, albeit their growth rate has somewhat slowed down.

*Quarterly indices of Inflation, Rent costs and House prices (Source: Eurostat)*

Residential real estate as an investment vehicle

While no official data is available, anecdotally a significant share of newly built homes have been purchased as an investment asset, rather than to be lived in by the owner. Between 2015 and 2019 the increase in prices outperformed inflation and rent growth. Coupled with a low reference interest rate, which made loans cheap and made savings offer lower returns than inflation rate, many retail investors turned to real-estate, with residential being the most accessible market.

As inflation soared in 2022 (+13.8% yearly average), residential prices failed to follow. With inflation expected to remain high in 2023 and 2024 (+10.8% and +5.7%, according to the CNP forecasts, or +9.7% and +5.5% according to the EC forecast), the appeal of investing in residential properties would diminish, pushing down demand, transactions and prices and thus potentially leading to a negative feedback loop. Since real-estate has traditionally been held as an inflation hedge, prices would have to drop quite significantly to trigger this type of loop, a scenario that many feel unlikely at the moment.

Home affordability

Most home purchasers are looking for a place to live, and for them affordability is a very important factor. A useful estimation is that of comparing average prices to the average income, an indicator we looked at in previous blog posts (here, and here) as well. While in 2007 the average monthly wage could buy you 0.20sqm in an average sized two-room flat, this steadily grew to around 0.50sqm in 2020. However, it declined to 0.45sqm in 2022, making homes slightly less affordable for the average worker.

To add to this, rising interest rates for mortgage loans make it even harder to buy a home. In 2022 there were 8 hikes to the National Bank’s reference interest rate, that climbed to 6.75% in December, up from 2% in January 2022. This translated into a near doubling (+82%) of interest rates for new housing loans, and they will remain high as long as the National Bank keeps reference rates up. As inflation subsides, cheaper loans might be on the horizon with a positive impact on demand for residential real-estate for both housing and investment purposes.

Q4 2022 sees a continued low value of construction starts in Hungary

Posted on February 16, 2023March 8, 2023 by efalucskai

Press Release on EBI Construction Activity Report Hungary Q4 2022

The latest EBI Construction Activity Report has found that after the weak Q3 2022, Q4 2022 saw a slight nominal expansion in Activity-Start in Hungarian construction. Nonetheless, the value of started construction works was still very low; between October and December 2022 they totalled roughly HUF 650 billion.

This time, though, for better comparability, the analysts of EBI Construction Activity Report also looked at the development of Activity-Start in Q4 2022 at constant prices. This shows that Q4 witnessed a considerably lower construction value, a bit more than Q3 (the negative record in recent years). Yet, whole-year-figures were high thanks to the higher Activity-Start in the first two quarters of 2022 and projects entered construction on more than HUF 3600 billion. Although it was a new record at current prices, it did not approach the highest values of 2017 and 2018 at constant prices and was at the level of 2019 and 2021. Annual change compared to 2021 at current prices was about +21%, while at constant prices it meant a drop of 0.6%.

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 Q4 2022 can be purchased at ebi@ibuild.info.

Expansion in value of started building construction works

The modest rise in Activity-Start at current prices was mostly coming from the expansion of building construction with the value of started construction works being HUF 500 billion in Q4 2022. Overall, the entire 2022 brought high numbers. Projects worth more than HUF 2000 billion entered implementation – the highest ever registered.

In Q4 the improvement over Q3 was evident in building construction even at constant prices. But the value of started works, except for 2020, was lower than the quarterly values of the past years. At constant prices, the Activity-Start indicator dropped during 2022 (-16.8%) and was roughly at the level of 2019. The better last three months were also typical for multi-unit housing and non-residential buildings, whether we look at current or constant prices.

In 2022, non-residential construction works were launched at a value of more than HUF 1800 billion, the highest amount so far. Thanks to the good first half of the year, even at constant prices, last year was considered a strong year: constant-price Activity Start of EBI Construction Activity Report was the third highest after 2018 and 2021.

Building construction projects launched in Q4 2022 included the CATL battery factory, the BMW plant, and the EcoPro BM electric battery cathode manufacturing plant in Debrecen. Construction also began on the CTP warehouses in Szigetszentmiklós, the University of Veterinary Medicine and the Siemens Energy M2B gas and steam turbine parts manufacturing plant in Budapest, as well as the logistics hall of HelloParks in Fót.

EECFA 2022 Winter Construction Forecast

Posted on December 5, 2022March 7, 2023 by janosgaspar

EECFA’s 2022 Winter Construction Forecast Report was released on 5 December. Full reports can be purchased. Discounts and sample reports: info@eecfa.com. EECFA (Eastern European Construction Forecasting Association) conducts research on the construction markets of 8 Eastern-European countries.

Yet another downward revision characterizes the forecast for both regions. Southeast Europe could see shrinkage on the horizon. This, however, comes after a great period of construction in between 2016 and 2021, so the market is foreseen to come down from a peak level. In this respect, the 3% decline until 2024 is no drama, in EECFA’s view. The drama is in East Europe where the peak was reached in 2018 and the market was around 10% below that peak level even before the Ukraine war began. Since then, EECFA has paused issuing forecasts in Ukraine and a status report has been prepared. Without Ukraine, the region is expected to reach its bottom in 2023.

In Southeast Europe, almost all countries have been revised downward. Three out of them, however, could see expansion until 2024. The foreseen contraction in Romania and Serbia pulls down the region to negative. Romania is quite pessimistic; the market could shrink by almost 10% by 2024. Serbia is expected to witness a sizeable drop, too, before growth returns in 2024. As the region saw much construction in 2016-2021, the market will likely decline from the peak, making the 3% drop on the forecast horizon not-so-drastic.

Bulgaria:

Under the projected economic slowdown, construction will increasingly be affected by the ongoing political instability that is likely to undermine reforms within the Recovery and Resilience Plan, and delay implementation of the EU’s operational programmes.
Тotal construction output is estimated to have grown in 2022.
For 2023-2024 civil engineering is forecasted to increase at a more accelerated pace.

Croatia:

Residential construction output held up in 2022, impervious to war and disease. But it’s likely residential’s rapid growth will over time succumb to rising prices and a falling population.
Rail construction output will rise as more rail projects come online. Some new high-cost road projects may yet be undertaken for political reasons.
Energy prices will fuel building of oil/gas port facilities, pipelines and storage in 2022-2023, construction that the EU’s green-energy push may quench in favor of renewable energy and power grid projects.

Romania:

The Romanian construction market is set to shrink slightly in 2023 and 2024 as internal and external factors conspire to make building materials more costly.
Inflation-induced lower purchasing power and growing mortgage interest rates are making loans more expensive, and few people can afford to buy a home in cash.
On the one hand, Romania could benefit from the current global instability and attract more foreign investment to grow its economy. On the other, increased energy costs translate to higher operating and construction costs and discourage investment.

Serbia:

The challenging economic situation will undoubtedly have negative effects on construction outputs. But how negative is the question of external factors and the coming events.
The domestic market is strong, with high public and foreign investments, as well as record employment. The highest economic risk comes from inflation and the expected recession in the EU.
The current economic slowdown could deepen the contraction in case of a prolonged crisis.

Slovenia:

Slovenia has experienced expansion in construction output on the back of the strong overall economic growth.
However, risks for the future include high inflation, large construction cost increases, and overheating economic growth. And increased interest rates will depress residential output in the future.
Supply chain constraints might jeopardize the completion of large civil engineering projects.

In East Europe, 2022 could be the 4th consecutive year of drop in Türkiye, and no quick recovery is foreseen on the horizon. We have turned somewhat optimistic in Russia, but only from 2024 on. Without Ukraine, the region will likely hit bottom in 2023. The region reached its peak in 2018 and just before the war in Ukraine started, the market was around 10% below this 2018 level. Owing to the war, Uvecon, the Ukrainian member institute of EECFA, has prepared a status report for the second time instead of the forecast report.

Russia:

Direct and indirect effects of sanctions hammered the construction market that declined faster in 2022 than previously expected.
Forced acceleration of projects in transport and energy, in response to export and import structure changes due to sanctions, will spur growth in civil engineering.
Many targeted programs and national projects will support the construction sector throughout the forecast horizon.

Türkiye:

The construction industry has been trying to deal with high inflation that has led to 120% yearly rise in construction cost and 189% increase in housing prices.
There has been some deficit between produced and needed home numbers since 2000, augmented by the influx of refugees from Syria and neighbouring countries (3,920 million registered; unknown unregistered).
The low-cost housing project of the government as of September is expected to stop the current slump in the construction sector.

Ukraine:

Prospects for construction depend on the existing situation on the market as a result of the destruction of residential, non-residential and engineering infrastructure, and the end of hostilities with the possible economic recovery.
Total area of damaged or destroyed housing is 74.1 million sqm (7.3% of the total area of Ukraine’s housing stock), a number which, unfortunately, grows every day. Restoring the housing stock will become a key issue for Ukraine after the war ends.
Energy infrastructure remains the top priority for recovery, as nearly 40% of the energy system has been destroyed.

Construction in Hungary leaves a weak quarter behind

Posted on November 22, 2022March 7, 2023 by efalucskai

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 ebi@ibuild.info.

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.

EECFA 2022 Summer Construction Forecast – Military conflict edition

Posted on June 28, 2022March 7, 2023 by efalucskai

EECFA’s 2022 Summer Construction Forecast Report was released on 27 June. Full reports can be purchased. Discounts and sample reports: info@eecfa.com. EECFA (Eastern European Construction Forecasting Association) conducts research on the construction markets of 8 Eastern-European countries.

Our earlier optimism over the Southeast European region of EECFA has gone. The current forecast is foreshadowing almost no growth until 2023 and contraction in 2024. The main reason behind is the worsening climate for construction due to the consequences of the Russian invasion of Ukraine. In the Eastern European region, we have turned pessimistic. The market of Russia and Turkey together is projected to stay below its 2021 level until 2024. We haven’t been able to provide our standard forecast for Ukraine in this summer round, but a status report has been compiled. We will resume providing forecast as soon as construction-related data collection of Ukrstat returns to normal.

Link to the viz >>

Forecast for Romania, the largest Southeast European construction market, has been revised downward. Instead of expansion, shrinkage is our current scenario. Serbia, which was the fastest growing market in the past 7 years, has an even more pessimistic outlook than in the previous forecast round. In Bulgaria, a whole different trajectory of spending EU funds is the reason behind the revision. We are negative on Russia all the way over the horizon and in Turkey the start of the recovery is expected to be postponed for yet another year.

Bulgaria. Owing to several external and domestic factors, outlook for Bulgaria’s economy to grow faster in 2022 has been reduced. And this year the construction market has entered a period of increasing unpredictability and heterogeneous performance. Residential construction has benefited from favourable financing conditions, and residential property has been used as a hedge against inflation. However, this will not last forever. EECFA is not optimistic in non-residential construction, while civil engineering could expand over the forecast horizon. Total construction output is prognosticated to be in the black with low, but positive growth rates in 2022-2024.

Croatia. The picture for Croatia’s construction sector is mixed, both from sector to sector and within sectors. Sector-to-sector, the output growth rates of Croatian construction sectors are decoupling, as some come close to completing the post-transition catch-up growth phase, while others are not nearly so far along. Within sectors, the strength of crucial output drivers, e.g., tourism season results, construction cost inflation, interest rate evolution, is uncertain and very dependent on events and policymakers’ reactions to them. Overall, the picture looks bright now, especially for residential construction, but the fight against inflation or a serious new COVID-19 outbreak could darken it rapidly and considerably.

Romania. As the short-term effects of the pandemic dissipate, the economy faces new challenges such as inflation and global trade disruptions. GDP is set to grow by 2.9% in 2022, in real terms, down from the previous prediction, but by 2023 (+4.4%) and 2024 (+4.8%) growth could accelerate (source: the National Forecasting Commission). Construction showed signs of recovery, so total construction output is to nominally grow, but slightly decrease in real terms this year. Material and energy prices have battered infrastructure projects hardest as seeking extra financing can be lengthy and difficult. Threats to construction growth in this forecast horizon are evidently increased costs of materials and energy, counter-inflationary policies, and the instability caused by the neighbouring war to regional and global trade networks. Countering these are the positive outlook for wages, employment, investment, and the overall economy. The availability of EU programs for co-financing, including the Recovery and Resilience Facility, could also help certain construction segments.

Serbia. In these challenging times, it will be a real endeavour to keep the pace and level of construction activity, even for a heated and growing Serbian economy. Unfortunately, economic and political developments in Europe are threatening to forcefully subdue the growing cycle in construction and the economy as a whole. So far, the economy is showing a relative resilience and construction activity has only slightly decreased compared to its expected performance in 2022, while permits are still keeping the good tempo. Nevertheless, the risks are still there, and a prolonged instability could produce a much deeper downturn and longer recovery. The strong performance of civil engineering and residential will assist this year’s output levels, but prospects for the rest of this forecast period are still quite conditioned by external factors. The ongoing economic crisis in the EU could easily escalate and produce further adjustments for 2023 and 2024 figures.

Slovenia. Construction output increased fast in 2021 as the pandemic subsided. With rapid economic growth following in 2022, total construction output will likely exceed EUR 4 billion for the first time since 2008. Real growth will be slower, though, as construction cost index has also increased with the fastest pace in a decade, up by more than 10% in 2021 and 2022. Future growth is projected to be slower, especially if interest rates grow faster than expected due to high inflation rates. Still, several large civil engineering as well as residential construction projects are set to continue and prevent construction output from decreasing.

Russia. Last year, the Russian economy showed strong recovery, partly on the back of construction whose growth turned out to be much better than expected (6,8% instead of 3,2% that EECFA had previously forecasted). The reasons behind were the active completion of non-residential projects that had been frozen in 2020, high demand in the housing market that supported construction activity in residential, and considerable state funding for various infrastructure projects that accelerated growth in civil engineering. However, the special military operation in Ukraine that began in February this year has neutralized all positive trends in construction and has led to a sharp worsening in the macroeconomic situation. Unprecedented economic sanctions imposed on Russia will inevitably affect the construction sector whose output is predicted to be negative throughout the forecast horizon: -2,7% in 2022 and from -1% to -1,4% in 2022-2024.

Türkiye. The Turkish economy is facing an unprecedented devaluation in Lira and soaring inflation, hammering wage earners. Manufacturing sectors relying on imported inputs, agriculture, and construction in particular, face difficulties in financing production and selling to customers with lower real incomes. But industrial production and exports are not much hit by the weakened Lira. Since the beginning of 2022, housing shortage, high dwelling prices and rents have been an issue. In the last 21 years fewer homes were built than the need, and the around 3,8 million Syrian refugees and illegal migrants appear to contribute to housing shortage. Due to the roughly 2,8 million dwelling units under construction, housing starts in Q1 2022 may continue to fall by the end of the year. The small decline in housing completion, however, because of declining demand under current macroeconomic conditions, may turn into a positive rate of change under the effects of interest rate subsidies for mortgage loans. Total construction output in Türkiye in 2022 is estimated to contract, so it would be the fourth consecutive year of decline. Mild recovery is expected to begin from next year on.

Ukraine. Since February 2022, Ukraine has been at war with Russia. As of June 2022, the Russians destroyed up to 30% of Ukraine’s infrastructure, damaged 2% of overpasses and more than 23,000 km of roads in Ukraine. About 20% of Ukraine’s territory is being occupied. Russia blocked the seaports through which imported goods were delivered to Ukraine. Building material factories and warehouses mostly remained in the occupied territory and most developers have frozen their projects for an indefinite period. Despite this, some positive signs are beginning to appear in the construction market, mainly in residential where the market is gradually reviving, adapting to the military situation (especially in the relatively safe western region). Little by little, critical infrastructure is being restored (destroyed bridges, roads, electricity and gas supply, communication lines). Under these conditions of major uncertainty, and before the end of the war, predicting future developments in the construction market of Ukraine is impossible. Therefore, Uvecon, EECFA’s Ukrainian member institute in Kiev, prepared a brief Status Report this time instead of the usual Forecast Report.

____________

Source of data: EECFA Construction Forecast Report, 2022 Summer

Contact information: www.eecfa.com, info@eecfa.com

Q1 2022: new record in Hungarian construction

Posted on May 16, 2022March 7, 2023 by efalucskai

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 ebi@ibuild.info.

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).

Potential impact of the war in Ukraine on the Romanian construction market

Posted on April 8, 2022March 7, 2023 by efalucskai

Written by Dr. Sebastian Sipos-Gug – Ebuild srl, EECFA Romania

Construction in Romania is not directly impacted by the conflict in Ukraine, however, there are several issues that would be indirectly made worse by it: construction costs, interest rates and inflation.

Construction costs already grew at a fast rate in 2021 (+25% yearly average over 2020), and even more so in early 2022, with January seeing a 41% increase in costs compared to January 2021. In these circumstances, an increase in energy costs and base materials due to both import difficulties and increases in global prices would lead to even higher costs and discourage investment in new construction. The Romanian economy is not strongly connected to that of Russia, Ukraine or Belarus, with imports from all three countries totaling at less than 5% of all imports into Romania in 2019 and exports to them totaling less than 2.5% of all exports in 2019 (last year unaffected by the pandemic, source: NSI). However, there are some segments where trade intensity is much higher: energy and ores. In 2019, 37% of all mineral fuels and oils and 40% of ores came from one of the three countries. Thus, trade difficulties would negatively impact the availability of fuel and materials and, thus, the price of construction.

*Brasov, Romania, 3 March, 2022. Photo by Traian Titilincu on unsplash.com*

While construction costs impact supply, the other two issues (interest rates and inflation) work together to negatively impact demand. The National Bank of Romania increased the reference rates to 3%: the 5^th raise since September 2021. This will have a knock-on effect on the costs of consumer and new mortgage loans, making them more expensive, at a time when the residential real estate prices are highest since 2008 with asking prices for apartments up 20% in March 2022, compared to the same month of 2021 (source: imobiliare.ro). Coupled with record levels of inflation, especially related to fuel, heating and food, this would make financing new home purchases exceedingly difficult, and will push demand down.

Although the non-residential construction market, thanks to the easing of restrictions, was on recovery track, all the previously mentioned factors would hinder recovery. Additionally, the subsector would also have some specific challenges such as global supply chain disruptions due to sanctions, rising energy and transport costs at a time when there is a moderate worker shortage and increased pressure from employees for more remote work options.

When it comes to civil engineering, demand for construction remains high, but the ability of the government to deliver on that demand will be hindered by reductions in the available budget for investment. Increased construction costs make public investment more difficult. The increasing current account deficit, the need for subsidies to counter the effects of inflation and energy costs on the most vulnerable citizens and increased defense spending (to 2.5% of GDP in 2023, from 2% in 2022) are all eroding the public funding available for construction of civil engineering projects. The saving grace of the segment will be the availability of EU funding, however even that will be made less effective by the increases in costs.

2021 saw an expanding value of started construction works in Hungary

Posted on February 18, 2022March 7, 2023 by efalucskai

Press Release on EBI Construction Activity Report Q4 2021

2021 as a whole saw expansion in the Hungarian construction industry. Compared to 2020 and 2019, the total value of started construction works also rose. Last year, the Activity Start indicator of EBI Construction Activity Report reached a total of more than HUF 2,500 billion, an increase of almost 18% against 2020 and of more than 6% against 2019. It is true, however, that last year’s growth was mainly due to the outstanding numbers in Q2 as Q4 brought a particularly low Activity Start. It was in 2016 last when there were 3 months with lower value of construction works started.

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. 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 Q4 2021 has been released and can be purchased at ebi@ibuild.info.

Building construction: drop at end 2021, but still a record-setter

Q4 2021 registered a weaker Activity Start in building construction works, mainly owing to the loss of momentum in non-residential building works. Overall, however, the lower numbers of H2 were offset by the higher values of H1, particularly in Q2. Thus, thanks to a successful first half of the year, building construction works have never started at such a high value as in 2021. As per the latest EBI Construction Activity Report, the value of construction works started last year reached more than HUF 1,800 billion with the growth over 2020 being close to 30%, and the growth over 2019 being more than 20%.

The Activity Start of multi-unit housing constructions saw an increase in Q3 and Q4 2021. In the full year of 2021, despite a weak Q4, the value of non-residential construction works set a record; such a high value of construction works has not yet started in the subsector. The Activity Start indicator of EBI Construction Activity Report amounted to more than HUF 1,500 billion in total, an increase of about 27% over both 2020 and 2019.

In Q4 2021, the biggest building construction projects entering construction phase comprised Alba Arena sports hall (Székesfehérvár), Chervon Auto automotive metal parts plant (Miskolc), Jedlik Ányos Grammar School (District 21, Budapest) and the Innovative Technical School and Grammar School (Biatorbágy).

Civil engineering: not the top performer of 2021

Since 2016 civil engineering works had not commenced at such a low value as they did in 2021. The Activity Start of EBI Construction Activity Report was slightly more than HUF 700 billion, meaning a further decline of 5% over the weak year of 2020, and a falloff of more than 18% over 2019. The Activity Start of road and railway construction works showed a 6% rise compared to 2020 due to the low base; but compared to 2019 the drop was close to 15%. In other than road and railway civil engineering works, the decline was almost 14% in 2021 against 2020, while the value of started construction works fell by 22% against 2019.

Among the biggest civil engineering projects that began in Q4 2021 were the railway section between Szeged-Transfer Station and Röszke, the Halimba-Szőc Solar Park, and the construction of the irrigation plant and irrigation system in Mezőhegyes.

Dropping share of Central Hungary

Q4 2021 saw a further drop in the share of Central Hungary in terms of started construction works. For the whole year, 34% of the value of construction works started in the region; lower than in 2014-2020 (38%).

The share of Eastern Hungary in Activity Start also lagged behind that of previous years, while that of Western Hungary went up to 35% from the previous 28%, according to the latest EBI Construction Activity Report.

Last year, after Budapest, the highest value of construction works started in Central Transdanubia.

Multi-unit housing construction getting off

Thanks to the favourable VAT rate, there was an increase in the value of started multi-unit construction works in 2021. A bit more than HUF 300 billion worth of construction works commenced in the segment, an increase of more than 40% over 2020 in the Activity Start of EBI Construction Activity Report. But the numbers were almost 4% lower than in 2019. Compared to 2018 and 2017, the difference was even more striking: more than 30%. The growth that started in Q3 and Q4 2021 is set to continue in 2022 with developers earlier this year announcing the launch of several major projects, as well as higher building permit numbers last year.

The biggest projects launched in Q4 2021 included several multi-unit housing projects in Budapest such as Phase I of New Palace, Ferdinand Garden, Balance Garden, Metrodom River building B and Westside Garden.

Even though the total value of projects completed in 2021 did not reach the 2020 level, it remained high. HUF 300 billion worth of multi-unit homes were completed in 2021, which, after 2020, was the second highest Activity Completion registered ever. According to preliminary data, 2022 is expected to set a record for completion again if projects planned for this year do reach completion.

Various parts of Hungary did not have the same share last year in the increase of multi-unit housing construction. A Bigger Activity Start was registered in Budapest, which dropped least in 2020, as well as Pest County and the Southern Great Plain region (starting from a low base due to the large drop). Overall, Central Hungary had a much higher share of the value of started multi-unit home construction works in 2021, more than 70%, compared to the average of 60% in previous years. The share of Eastern and Western Hungary in 2021 lagged behind their share in the period between 2014 and 2020.

Northern Great Plain

Compared to pre-2017, construction works in the Northern Great Plain region in recent years have been starting at a much higher value. 2017 and 2018 saw an exceptionally high construction Activity Start, but it also stayed high in 2019 and 2020. Although in 2021 started construction works had a lower value than in 2020, the Activity Start indicator still surpassed the 2019 level, and was much higher than pre-2017.

Even though the Activity Start of multi-unit housing construction somewhat grew in the region in 2021 over 2020, it still lags far behind the figures of 2016-2019; for instance, by more than 30% over 2019. Between 2016 and 2019, works began on larger projects in the region such as Phases 2 and 4 of Paris Courtyard (Párizsi udvar) or Ispotály residential park (both in Debrecen) and János-hegy residential park (in Nyíregyháza). Despite the low numbers in 2021, larger multi-unit residential projects were also launched in the region like the Debrecen project (in Hajdúböszörmény) or Phase 1 of Platanus residential park (in Debrecen).

Based on data available for the first 9 months of 2021, 2022 might see a further major expansion in the Activity Start of the region. The number of permitted homes hiked between January and September last year and 90% more permits were issued in the region than in the same period of 2020. For comparison, the country-wide growth was only 30% between the two periods.

The value of non-residential construction works launched in the Northern Great Plain region increased greatly by 2021, and even exceeded the highest value of 2018. Thus, overall, the Activity Start of building construction reached a record high in the region in 2021. For example, construction started on the East-West Gate intermodal logistics centre (Fényeslitke), on Phase 3 of Lego injection moulding plant and on Phase 3 of the packaging plant and warehouse (both in Nyíregyháza). Last year also saw the start of construction works on Semcorp foil production plant (Debrecen) and on Tiszakavics Hotel (Szolnok). The growth is striking despite that the construction of the BMW plant did not eventually start last year. And Activity Strat is expected to remain high this year as rumour has it that the first building works at the BMW plant (central office building and training centre) could begin in 2022.

In recent years works on road M4 and projects related to the BMW project fuelled the Activity Start of civil engineering in the region (for the latter, for example, Phases I and II of the North-West Economic Zone infrastructure development and Phase 1 of the Debrecen-Füzesabony railway section started). But last year the value of started civil engineering works sank massively in the Northern Great Plain and it had not been so low since 2015. Biggest projects in 2021 included the civil engineering works of the above-mentioned East-West Gate intermodal logistics centre and the City Stadium project in Nyíregyháza.

Original article in Hungarian: Tünde Tancsics, ELTINGA

English version: Eszter Falucskai, BUILDECON