EBI Construction Activity Report Q4 2020 Hungary

Value of started construction projects on downward track in Hungary

Due to the pandemic, construction industry in Hungary last year registered a significant fall and the last quarter couldn’t save the year either. The latest EBI Construction Activity Report has found that Q4 2020, similarly to the low-value Q4 2019, saw the start of construction works at a value of HUF 442bln. Owing to the massive drop in mid-2020, 15% less construction work started than in 2019 and 30% less than in 2018. In 2020 the Activity Start Indicator of EBI Construction Activity Report accounted for less than HUF 2000bln (HUF 1990bln). And the decline affected all major subsectors.

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

Building construction registering yet another decline in activity

Although 2020 saw quite a strong start in building construction, the momentum slowed down from Q2 on. As per the latest EBI Construction Activity Report, except for the first three months of 2020, construction works in building construction started at a lower value than in the previous period. In Q4 2020 the Activity Start of EBI Construction Activity Report amounted to only HUF 280bln. Overall, the value of building construction works started last year was HUF 1353bln, much lower than in 2019 and 2018, compared to which the difference was 10% and 17%, respectively.

The main reason for the decline is the great drop in the number of multi-unit buildings. The total value of such projects entering construction phase in Q1 2020 even exceeded the numbers of Q1 2019. Yet, the shrinkage in the following 9 months was so large that the value of projects started in 2020 fell to the level of 2015-2016 in the segment, showing a decline of almost 40% over 2019. In case of non-residential buildings, there was hardly any discrepancy in Activity Start between 2020 and 2019.

The biggest projects launched in Q4 2020 include the construction of Hotel Hévíz in Hévíz, the restoration and development of the Citadel in Budapest, and the construction of several rural industrial and factory buildings such as Nestlé Purina pet food factory in Bük or the ZalaZone military plant in Zalaegerszeg.

Q4 2020 no savior of civil engineering

2020 was a mixed year for civil engineering. In Q1 it managed to maintain the Activity Start value of the same period of the previous year, and Q4 was 70% higher than the end of 2019. In contrast, the middle of the year was well below the 2019 figures with the value of construction works started in Q2-Q3 dropping by 45% against mid-2019. Overall, the HUF 636bln Activity Start indicator for civil engineering in 2020 was almost 40% lower than the average of 2017-2019. But compared to the 2010-2016 average, this value is still 25% higher, so the period between 2017 and 2019 can still be considered outstanding.

Within civil engineering, the total value of started construction projects in road and rail segments decreased by 32% over 2019. In case of non-road and railway construction, the drop was also significant, but we could see a more modest (15%) decrease than previously presented in the Activity Start of EBI Construction Activity Report.

The highest-value civil engineering projects launched at end 2020 comprise for example, the start of construction of the Budapest Athletic Stadium and the ZalaZone automotive test track in Zalaegerszeg.

Central Hungary’s growing share

Looking at all started construction works, Central Hungary and the western regions of Hungary closed 2020 with almost the same Activity Start value as they did in 2019, with the indicator even slightly growing. But in the eastern regions, the total value of projects entering construction phase plunged (by 41%) with the decline occurring mostly in the second half of 2020. Thus, Central Hungary and the western regions increased their share in the value of started construction works, while the share of eastern regions went down to 25%, according to the latest EBI Construction Activity Report.

2021 might be a better year for the multi-unit segment

The pandemic-related economic downturn, combined with the resetting of the VAT rate to 27% as of early 2020, resulted in a remarkably low Activity Start in the multi-unit housing market last year. The last half of 2020 recorded such low numbers that can only be found in the years 2014-2015. However, the newly introduced 5% VAT rate from this year on could halt the plunge and even generate growth in the segment, which would allow the market to return to much higher Activity Start numbers this year.

When looking at Activity Completion indicators, we get a completely different picture as the total value of completed projects last year amounted to a record high of HUF 424bln. This is 40% higher than the previous peak in 2019 and it doubled compared to 2018. Preliminary data for 2021 are expected to have a similarly high value in completed projects.

The 40% countrywide decline in the Activity Start of multi-unit housing was uneven in the regions. In Budapest, the value of projects started in 2020 went down by only 9% against 2019. However, in all other regions the decrease was more than 40%, while in Pest county it was 85%. Due to these tendencies, regional shares have also changed. Because of the importance of Budapest, more than two thirds of the value of the started multi-unit construction works was concentrated in Central Hungary. The western and eastern regions remained well below their multi-year average.

Growing mood for hotel construction, stagnant Budapest

Last year also exceeded the record high value of 2019. In 2020 hotel construction works started on HUF 91bln, a 6% increase like-for-like. The last quarter of last year was outstanding with HUF 36bln of Activity Start registered, according to the latest EBI Construction Activity Report. However, this amount was distributed differently than in previous years between the capital city and rural areas. While there was a roughly 50%-50% share in 2019, in 2020 Budapest only had a 13% share and the rural Activity Start accounted for 87%. Such a low value has not been registered in the capital city since 2016. This is in sharp contrast to the 82% rural annual growth but even in this case, there are major regional differences. In 2020, the two regions pulling the segment were northern Hungary and the Lake Balaton area. For example, at the end of last year, the construction of Hotel Hévíz (Hévíz) and the Hampton by Hilton hotels (Budapest) started. Earlier last year the construction of Minaro Hotel Tokaj, Green Resort Balatonfüred and BalaLand Hotel began.

In 2020, the value of completed hotel construction works also continued to grow, with a total of HUF 48bln worth of hotel completions (a 33% increase). Regionally, the capital city had a higher share in the total value of completed projects (two-third) than in the case of started ones. This year is also expected to see a growth in completions and hotels could be completed at an even higher value.

Completed projects last year include Botaniq Castle (Tura) and Kozmo Hotel (Budapest), while works are expected to be completed in the first half of this year in Budapest for Matild Palace, InterCity Hotel and B&B Hotel. In the countryside Mária Valéria Hotel in Esztergom, Erzsébet camps in Fonyódliget and the youth sports accommodation in Felcsút can reach completion.

Soaring education-related projects

In 2020, construction works on educational buildings started at an outstanding value. Although the peak of HUF 140bln in 2018 was not achieved and fell short of the value of 2019 by a few percentages last year, it is the third most successful year with projects having started on HUF 120bln, far exceeding the average of HUF 44bln in 2000-2016. For example, 2020 saw the start of construction in EMC Measurement Lab server center in Budapest on HUF 16bln, the Semmelweis University Faculty of Medical Sciences, Department of Traditional Chinese Medicine and St. Angela Franciscan Primary School and Grammar School, and the University of Debrecen Innovation Center and Learning Center. The renovation and expansion of the Szeged Medical Sciences Training Block can start at the beginning of this year.

Education-related construction projects amounted to HUF 102bln in Hungary in 2020, and the outstanding trend of recent years can also be felt in completions. For example, the construction of the partly R&D center Univerzum Office Building in Budapest, the renovation of the campus of the Faculty of General Medicine of the University of Pécs and the reconstruction of the Ludovika Wing Building, as well as the construction of the Rózsakert Demjén István Reformed High School were also completed. In the short term, even more projects may reach completion with several of them being in Pest County. In Érd, the renovation of Batthyány Sports School and Primary School and the vocational training center of Kós Károly Vocational High School, as well as the construction of Fenyves-Parkváros Public Education Center and the construction of a primary school in Biatorbágy are planned.

Hungarian construction industry couldn’t pull itself together in Q3

In previous quarters the analysts of EBI Construction Activity Report broadly discussed the negative effects of the pandemic on the domestic construction industry. The latest figures also suggest that there is still no improvement in the sector after a weak first half of the year.

EBI Construction Activity Report Q3 2020

In the first three quarters of 2020, construction works started at a 20% lower value than in the same period of 2019, even though the beginning of the year got off to a good start in construction. The value of Activity Start indicator stood only at HUF 1,484 billion, the lowest amount in the last 4 years. Between July and September, less than HUF 390 billion worth of construction projects started, which is also a negative record because since Q4 2016 we haven’t seen such a low Activity Start in Hungary. Compared to Q2, there was an 18% slump between July and September, according to EBI Construction Activity Report.

EBI Construction Activity Report examines the situation of domestic construction industry on a quarterly basis, including the volume of newly started construction works, and the value of projects completed in each quarter in aggregate and by sector as well. It is prepared by Buildecon, Eltinga (creation of indicators and development of algorithms for aggregation) and iBuild (project research and project database). Full publications can be purchased at ebi@ibuild.info.

In the first 9 months of 2020, 42% of construction works started in Central Hungary and 30% in Western Hungary, so works started in both areas at a higher rate than the average of previous years. Looking at Q3 alone, Western Hungary’s share is outstanding (45%) due to the launch of several major projects such as the one for Main Road 83 (Győr-Pápa).

Although Q2 saw higher numbers in civil engineering than Q1, Q3 registered another drop in Activity Start. Thus, overall, construction projects in the subsector started in a significantly smaller value in the first 9 months of 2020 than in the same period of 2019. Against the first three quarters of 2019, the value of started construction works was 36% lower. The Activity Start indicator accounted for HUF 470 billion (out of which only HUF 145 billion between July and September). Considering the past 3 to 4 years, figures for the first three quarters are rather weak. It was only in 2015-2016 when the value of projects entering construction phase was lower. In the first 9 months, road and railway as well as non-road and non-railway civil engineering segments were characterized by the same drop as in the previous year. Among civil engineering works, for example, construction phases 1 and 2 of Main Road 83 started in Q3.

Building construction did not improve in Q3 either. Between July and August projects started at a lower value than in Q2, totalling HUF 244 billion – the lowest level since Q4 2016. According to EBI Construction Activity Report, the value of Activity Start indicator amounted to HUF 1 billion for the first 9 months of the year (a 10% shrinkage like-for-like).

The rate of decline was bigger in case of multi-unit housing construction: January and September 2020 saw a 35% lower value of started such projects like-for-like. In case of non-residential buildings, the difference was only 3%, which was mainly due to the high numbers in Q1. The Activity Start indicator in Q2 (which was low compared to the last three years) was followed by an even weaker Q3. Yet, larger projects did start in this period. For instance, among non-residential projects Q3 2020 saw the start of Phase II of the University of Physical Education in Budapest (sports hall and underground garage: Csörsz block), renovation works of Csokonai National Theatre and Latinovits Theatre (Debrecen), Phase III of BalaLand FamilyPark (Szántód) and the revamp of Allee shopping centre (Budapest).

Even compared to the previous weak quarters, Q3 2020 brought a deteriorating Activity Start for multi-unit housing construction. Projects entered construction on a value of only HUF 21 billion, a level not seen since 2014, and the low number of projects already evoked the low levels of 2013 during the crisis. No wonder that figures for the first 9 months have been a multi-year negative record since 2015, with Activity Start amounting to only HUF 154 billion.

Q3 2020 also saw a record broken for completions of multi-unit housing projects, with homes never being completed in such a high value as in July-September. The value of Activity Completion indicator was HUF 122 billion. This peak is estimated to be broken in Q4 with the value of Activity Completion being HUF 193 billion, according to EBI Construction Activity Report.

But the announcements in recent weeks that affect the housing market may bring major changes in the segment. Although resetting the VAT rate on new homes from 5% to 27% this January largely contributed to this year’s dramatic drop in Activity Start, the VAT rate is set to fall back to 5% from next January in case of constructions that start until the end of 2022. Moreover, families can even be exempted from paying the 5% VAT. The new regulations are set to kick-start projects again, so the analysts of EBI Construction Activity Report expect a considerable improvement in the Activity Start indicator.

A visual summary to Euroconstruct Special Update August 2020

by János Gáspár – Buildecon, Hungarian member to Euroconstruct

In most countries the stories after the August revision remained pretty similar to those Euroconstruct forecast in June. Charts below are organized by region, the dotted black line represents the 2019 level. At Europe’ heartland and in the Nordic countries (in the top row) there are very stable markets. Except for Finland and Sweden, each of them foresees the total market in 2021 to be around the level of 2019. Out of the largest countries, the most sluggish recovery could be in the Netherlands, in the UK and in Spain. Poland seems to be crisis-resistant.

>> CLICK HERE FOR THE FULL VISUAL SUMMARY

Lowest figures in started construction projects in Hungary in the past 3 years

The last quarter of 2019 saw another significant decline in launched construction projects in Hungary, amounting to only HUF 424bln worth started total construction works – as per the latest edition of EBI Construction Activity Report. Works started in the sector in a much lower value for the 2019 year as a whole as well. The drop in 2019 was 21% over 2018; and even compared to 2017, the difference was -11%. In 2019 the Activity Start Indicator of the Report totalled less than HUF 2200bln, compared to the almost HUF 2790bln a year earlier.

Building construction activity fell in Q4 2019

The Report has also found that in Q4 2019 building construction registered a lower value of started works than in the previous quarter, amounting to HUF 311bln. Overall, in 2019, Activity Start for building construction accounted for HUF 1364bln – significantly less than in 2018 and marking a decrease of 15%. However, calculated based on the ibuild.info project database, even the value in 2017 surpassed the 2019 one.

Weakening non-residential and multi-unit housing construction figures both were to blame for the slump in building construction. Multi-unit housing projects had also been seeing a decline in the value of Activity Start indicator over the past quarters, and the trend continued in Q4 2019 as well. Non-residential construction projects posted a much more modest drop.

Launched building construction projects in Q4 2019 comprise several hotels and office buildings, the construction of the Szeged Handball Arena, Phase I of Nagykanizsa multifunctional sports and event hall, upgrades of M3 Business Center buildings A and B, and renovation works of Hungexpo.

Published quarterly, the EBI Construction Activity Report creates aggregates from project data for 18 segments by object type (multi-unit residential, 9 non-residential segments and 8 civil engineering segments). It is prepared by Buildecon, Eltinga (creation of indicators and development of algorithms for aggregation) and ibuild.info (project research and project database). Full publications can be purchased at ebi@ibuild.info.

The fourth quarter of 2019 was very poor in civil engineering

Even though the period between April and September 2019 saw the start of civil engineering works in a massive value, Q4 2019 recorded a huge drop in numbers. Activity Start amounted to only HUF 113bln, the lowest value since Q4 2016 and only one-third of the value in Q3 2019. As a result, civil engineering closed the year with a massive decline, posting 30% fewer started construction projects in 2019 than in 2018 (a 22% drop against 2017). However, the 2019 Activity Start (HUF 835bln) is not considered to be extremely low in the segment. Rather, the years of 2017 and 2018 are considered to be extremely high.

In 2019, within civil engineering, mainly road and railway construction projects started in a much lower number than in 2017 and 2018, accounting for HUF 432bln. This was mainly due to the major decline in the Activity Start of railway construction projects, with only HUF 48bln of projects entering construction phase. The HUF 384bln worth Activity Start in road construction showed a much smaller difference compared to 2017-2018, and it surpassed the values in preceding years.

Started civil engineering projects in Q4 2019 are scarce, but include the construction start of the South Railway Bridge on the Danube in November 2019, for example.

Central Hungary was in the lead again in Q4 2019

Like Q3 2019, Q4 2019 also saw the start of fewer projects than in previous years in Eastern Hungary, offsetting the region’s high share in H1 2019. Thus, in 2019, 36% of the value of started construction works concentrated in Eastern Hungary.

Central Hungary was the other way around: while in H1 2019 its relative share in Activity Start was lower than in previous years, in H2 2019 it significantly exceeded it. The Report has found that between October and December 2019 more than half of the value of new construction works concentrated in Central Hungary.

There is a clear downturn in multi-unit housing construction

From January 1 this year, resetting the VAT rate from the previous 5% back to 27% brought a major change in the Hungarian multi-unit housing market. As of this year, units in projects having obtained a building permit after November 1, 2018 can only be sold at the higher VAT (above net prices). Last year, the approaching end-of-December deadline increasingly had a knock-on effect on the value of started construction works. The value of the EBI Activity Start Indicator for multi-unit housing construction amounted to only HUF 49bln in Q4 2019. For comparison, in all quarters of 2018 the value of projects started for three months exceeded HUF 100bln. In 2019, as a result of the downturn, construction works started in a total of HUF 263bln against the more than HUF 400bln in the previous two years. Last year, the EBI Activity Start Indicator for multi-unit housing construction fell 39% nationwide.

Despite the rosy figures of Q3 2019, only 44% of the investment value was concentrated in Budapest, so the capital city’s share in multi-unit housing construction dipped compared to previous years. It is not surprising, though, as in 2019 the shrinkage in construction starts was 51% y-o-y, according to the EBI Construction Activity Report. Central Hungary had a share of 52% of the total value of newly built multi-unit buildings, indicating a huge drop against previous years.

In 2019, the EBI Activity Completion Indicator Continue reading Lowest figures in started construction projects in Hungary in the past 3 years

EBI Építésaktivitási Jelentés

  • Hány darab irodaprojekt építése kezdődött meg 2016 1. félévben az országban?
  • 114 darab
  • De ebből mennyi az új építés, és mekkora a volumene?
  • 33 darab és az összes becsült építési érték 66 milliárd forint.
  • És mennyi felújítási projekt indult el oktatási épületeken?
  • 80
  • Milyen értékben?
  • 14.9 milliárd forintnyi, ami 20%-kal kevesebb, mint 2015 1.  félévében.

Az összes magas és mélyépítési szegmensre ilyen és ehhez hasonló adatokat állítunk elő egy kutatás keretében, melynek első kézzel fogható összegzése szeptemberben készült el. Az összes az jelenti, hogy a lakásépítést külön, a nem-lakáscélú magasépítést 9, a mélyépítést 8 szegmensbe kategorizálva aggregáljuk az egyedi építési projektadatokat.

Ezt a posztot egyfajta kézikönyvnek szánjuk, hogy bemutassuk milyen adatok kerültek az EBI Építésaktivitási jelentésbe.

A sajtóanyag itt elérhető: .zip (egy pdf és néhány kép)

A teljes anyag az ibuild.info oldalán olvasható (regisztáció után)

1. A fenti példát folytatva, azon kívül, hogy 114 irodaprojekt kivitelezési munkái indultak el az országban 2016 1. félévében, azt mutajuk még be, hogy ezek várt építési értéke 88 milliárd forint, és hogy ez háromszor annyi mint az előző év hasonló időszakában elindult irodaprojektek építési értéke.

aktivitas_1

Continue reading EBI Építésaktivitási Jelentés

New manufacturing is coming: Europe or China will be the new China?

JAPAN-SCIENCE-TECHNOLOGY-ROBOT ELDERLY

Robear is helping to revolutionize the manufacturing industry: do robears prefer China or Europe? (source: HuffingtonPost)

Adidas has announced that it will open its first all-robot factory in Germany, and many will follow in rich countries. Foxconn, the manufacturer of Apple products fired 60,000 employees and employed robots instead of them. It seems this is the beginning of the end.

The way we manufacture products is about to change dramatically in the next decade. There are two intertwined trends that have already started to revolutionize the industry: the digitisation of industry (or the “takeover of robots”) and that global economic growth is less and less energy and machinery-intensive (more and more value added comes from services). None of these are new; however, both of these trends are in front of a new era of growth. Developments in big data and machine learning are increasing the capabilities of robots and global value chains are becoming seamless. Economic growth is coming increasingly from services, as opposed to manufacturing. Moreover, growing concerns about climate change and the ongoing shift away from heavy machinery in state-of-the-art manufacturing are leading to the growing use of lighter materials instead of metals. Continue reading New manufacturing is coming: Europe or China will be the new China?

The Do-It-Yourself guide to success in Central Eastern Europe

Are you a motivated social engineer in CEE? Do you want to change the country you live in? Or you are just interested, what could be the most successful strategy on the periphery of Europe? You are at the right place. Please, welcome the D-I-Y Guide to CEE!

In this post, we first define success in CEE. Second, using the Global Competitiveness Report, we analyze what aspects could help a country achieving that success. And third, we present you the ultimate D-I-Y Success Guide to CEE. Continue reading The Do-It-Yourself guide to success in Central Eastern Europe

The coming wave of energy efficiency investments

The most energy efficient animal and the wave. Source: FatCatArt

This week’s post is concerned with energy efficiency investments in housing. We wanted to point out the importance of three factors: stable economic growth, further decrease of costs in renewables, and sufficient amount of fundings from the EU. All three factors seem to be fulfilled for the next couple of years, and we think a new wave of energy efficiency investments is likely in the future. Continue reading The coming wave of energy efficiency investments

The oil price decline and the construction market: riding the Saudi bull

the bull After assessing the impact of immigration on the European Union, this week’s post concentrates on another current issue: the oil price decline and its consequences on the construction sector.

This global income redistribution from oil exporters to importers is an opportunity for the construction market: they can ride the falling Saudi bull as cheaper fuel prices, lower costs and stimulated EU economies may generate more demand.

The International Energy Agency is forecasting a lasting low price environment; therefore both short and medium term effects are worth studying. The direct effect of lower fuel prices is a boost both for companies in the construction sector and for most European economies. However, missing petrodollars in the world economy and Russia’s dependence on oil revenues hold an important risk for the future.

Such issues will be discussed at the 80th EUROCONSTRUCT Conference. Continue reading The oil price decline and the construction market: riding the Saudi bull

The housing market’s James Bond: increasing immigration

Our current post is the next in line dealing with migration that has an impact on construction. Such issues will be discussed at the 80th EUROCONSTRUCT Conference.

In our previous post we concluded that lower potential economic growth and an increasing immigration are likely in Europe in the long run. An overall lower economic growth puts pressure on the construction industry as well, however, increasing immigration provides new opportunities for growth. In this post we will first elaborate on possible short-term effects and then we will present our expectation for the long-term. Continue reading The housing market’s James Bond: increasing immigration