Construction material prices start to decrease in Hungary

“As a rule of thumb, construction costs 20 to 25% more in October than it did in February. About two-thirds of this increase was due to global trade trends and the price explosion in the construction material market. Under normal circumstances, construction prices rose 10 to 12% annually in the past three or four years,” Koji said when asked how much prices rose in the past few years, adding that

no further price increase should be expected.

Some 48% of construction materials used in Hungary are exposed to import, the highest ratio not just in the Visegrád countries but probably in the entire EU, Koji said. “More construction materials should be manufactured in Hungary. In the medium term, the import of construction materials and products should be decreased to less than 30%,” he said. Raw materials such as wood or iron will still have to be imported, but manufacturing should take place domestically.

Speaking about expected further growth in construction this year, Koji said construction industry output rose 20% in each of the past two years, compared to a 15% ideal growth rate. The current forecast for 2021 is 15% growth, although a psychosis related to next year’s elections is evident among market players, he added. Government terms also coincide with investment cycles, and this is especially important in Hungary where orders by the national government and local governments account for 60% of the total, in contrast with the 50% seen elsewhere, Koji pointed out.

In order to protect the construction industry, Hungary introduced mandatory registration for exporting construction materials this summer.

The government’s measures achieved their fundamental objectives: we were able to keep working as there was no material shortage to slow construction output.

On the other hand, the “extraprofit tax” has not delivered the expected results. The companies involved chose to pay the tax rather than decrease prices, fearing the transfer of profits to wholesalers in the latter case. “Now, however, there is an ample supply of construction materials in the market and prices are beginning to drop, but this is a result of changing supply and demand rather than the effect of the profit tax,” Koji said.

The price of critical commodities has begun to decrease in September. “Once the roughly six weeks’ worth of inventories purchased at the earlier higher prices run out, the price difference may be reflected in retail prices as well. General contractors have indicated that this process has already started as they are buying wood, copper and aluminium-based products as well as rock wool insulation cheaper in October.

Prices have decreased by 10 to 15% but are still well above the starting point and will not return to earlier levels,

Koji stressed. Despite higher prices, demand is increasing, even at comparative prices adjusted for inflation, he added.

Cover photo: Getty Images