Tough times ahead for the construction industry, but there is good news for builders
The latest data from the Hungarian Central Statistical Office (KSH) already show a serious decline in the performance of the domestic construction industry. In May 2023, the volume of production was 12% lower than a year earlier, according to raw data. Among the construction sectors, construction of buildings fell by 13.6%, other construction by 11% and specialised construction by 11.4%.
The sharp drop in the order books is a worrying sign.
The volume of new contracts signed fell by 36.9% compared to a year earlier, including 48.5% for the construction of buildings and 11.9% for the construction of other structures, indicating that the construction sector, including building materials traders, is facing a difficult period. A comprehensive survey of the expectations of the latter was carried out by the recently established Hungarian Construction Materials Trade Section of the National Federation of Building Contractors (ÉVOSZ), involving 150 companies.
While the majority of responding firms reported a net sales increase last year, 86% expect a deterioration in profitability this year, with the main reason being a lack of orders. The positive change is that 92% of them did not experience any supply difficulties in the first half of the year, meaning that the shortage of building materials they had previously experienced has essentially disappeared. And the good news for those planning to build or renovate is that traders expect an average single-digit fall in the price of products in the second half of the year. EPS (polystyrene) insulating materials and concrete reinforcing steel are likely to see the biggest price reductions, while the smallest changes are likely to be seen in paint, cement and plasterboard.
The research shows that traders see the solution in increasing energy efficiency, expanding products and related services, training staff and exploiting the potential of the rapid development of digitalisation.
According to the survey, one third of building materials retailers are forced to reduce their workforce this year, while 8% are planning to expand under current conditions. More than two-thirds of firms expect to find skilled labour in the labour market as before or more easily, so firms that are looking to recruit new workers or make quality replacements are likely to succeed.
The good news for builders, however, is that the shortage of raw materials has essentially disappeared and prices may moderate in the period ahead.
Building materials retailers are addressing market difficulties with cost-cutting measures and enhanced services, as well as a focus on staff training and the wider adoption of digital solutions to improve efficiency.
Cover photo: Getty Images
