Hungary has not seen so few construction starts in ten years - sectoral research

Overall, however, the first-half numbers did not show a dramatic drop compared to the first half of 2023, with an 11% decline, thanks to the first-quarter outlier. Compared to 2021, however, the gap was 18%, and compared to the outstanding first half of 2022, the gap jumped to 45%. In constant prices, the Activity Start was the negative record of the last 9 years.

Fewer starts in building construction

The first quarter, characterised by a higher Activity-Start, was followed by a decline in the second quarter for building construction. The value of construction starts fell below HUF 360 billion, the lowest quarterly figure since 2020. Overall, the sector was characterised by weaker Activity-Start in the first half of the year, with the value of construction starts down by 11.8% compared to the first half of 2023, while the backlog in current prices was almost 30% and 21.5% compared to the same periods in 2022 and 2021, respectively.

At constant prices, the only period weaker than the first half of this year was the same period in 2014.

A significant part of the decline was due to lower non-residential high-rise starts, while the decline in condominium starts was much smaller, with the value of starts roughly at the level of the first quarter. For non-residential high-rise construction, Activity-Start was slightly higher at just over HUF 260 billion between April and June this year, down nearly 43% from the first quarter, but also down significantly from the same period in the previous 3 years.

For each quarter of the period 2021-2023, the second quarter of this year was the second lowest at current prices and the lowest since 2013 at constant prices. Due to the weaker second quarter, the first half Activity-Start was also lower than the same period in the previous 3 years at current prices, while at constant prices it was only lower than the same period in 2014.

Among the largest building construction projects launched in the second three months of this year were the construction of Hungarian Bankholding's (MBH) Headquarters, the first phase of BYD's electric car factory in Szeged and Huayou Cobalt-Bamo's cathode plant in Ács.

The construction of the Moxy Budapest Downtown Hotel in Budapest has also started, as well as the construction of several condominiums.

Civil engineering project starts at a minimum level

Following the strong first quarter figures, there was also a significant drop in the Activity-Start for civil engineering between April and June. The second quarter saw minimal project starts, with the value of construction starts not even reaching HUF 70 billion, the lowest quarterly total since 2016. Comparing the first half of the year with previous years, however, 2024 can no longer be considered a particularly bad year, with Activity-Start 10.5% and 9% below the same periods in 2023 and 2021 respectively, and even exceeding the 2020 figure, with the only significant drop being compared to the outstanding January-June 2022 figures. Within civil engineering, road and rail construction accounted for roughly 45% of Activity-Start in the first half of the year, with the total under HUF 200 billion.

Quite an indication of the very low level of civil engineering Activity-Start in Q2 is the fact that no civil engineering projects made it into the top 10 construction starts between April and June.

Most construction projects were launched in Budapest

Looking at the last 4 quarters, Budapest has once again seen the highest proportion of construction starts, with its share of the national Activity-Start exceeding 40%. The Northern Great Plain had the second largest percentage, but its 13% share of acquisitions was a significant drop from the 20-30% figures of previous quarters. The Northern Great Plain was followed by Pest County, with a 12% share,

with the lowest share of investments in the Southern Transdanubian region, which accounted for only 5% of the construction starts in the last 4 quarters.

Condo housing construction delivers the Q1 figures

The amount of condominium housing starts in the second quarter was almost unchanged from the first quarter, with a total of just over HUF 90 billion worth of construction starts in the second quarter. Thus, condominium Activity-Start totalled less than HUF 200 billion in the first half of the year, roughly the same period in 2021 and 13% higher than the same period in 2023, but 15% below the January-June 2022 level.

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.

Only in H1 2015 was it lower than the current figure. Nevertheless, compared to other construction sub-sectors, condominium housing performed much better in Q2: the 10 largest-scale projects entering construction phase included several multi-unit ones, even with just over 100 flats.

Although the amount of completed condominium housing construction fell in the second quarter compared to the first, it remained at a high level, exceeding HUF 200 billion in the first half of 2024, the strongest first six months in recent years. Activity-to-completion in the first half of 2024 was nearly 42% higher than in the same period in 2023, and even surpassed the record first-half result in 2020 by more than 22%. And the Activity-Completion ratio is set to remain high, with this year potentially setting a record based on the expected delivery dates.

Based on the data from the past 4 quarters, the largest share of condominium housing starts continued to be in Budapest, and the capital's share increased compared to the previous quarter, with two-thirds of the Activity-Start being in Budapest. Eastern Hungary accounted for 15.5% of condominium starts, while Western Hungary accounted for 16.6% of condominium starts.

Southern Great Plains

This time, the analysis looked in more detail at the Southern Great Plain region: in the first half of this year, the Southern Great Plain also saw some expansion in the construction sector, even if the second quarter of the year saw a decline after the first. Activity-Start was HUF 126 billion between January and June.

Building construction projects accounted for a significant share of the Activity-Start in the region, with construction starts worth HUF 110 billion in the first half of the year, the same level as in the first half of 2023

and higher than the sector's performance in the second half. However, it was also true for the region's high-rise construction, with higher Q1 numbers pulling the half-year figures upwards, while Q2 saw a more moderate Q2-Q4 activity level than Q1, but significantly above the 2023 Q2-Q4 period. Within high-rise construction, condominium starts were at a minimal level in the region, similar to previous years, with only 6% of national condominium starts in the first half of the year.

Among the largest non-residential high-rise projects entering the construction phase in the first half of 2024 in the region were the Benepack aluminium packaging plant in Makó, the Mercedes-Benz battery assembly plant in Kecskemét and the first phase of the BYD electric car plant in Szeged, which was among the largest projects in the country at the time. These projects were also quite large in terms of construction starts in recent years, ranking second, third and fifth in terms of value for the period 2021-2024.

There were hardly any deep construction projects started in the Southern Great Plain this year, with Activity-Start in the first half of the year at less than 16 billion HUF, one of the lowest 6-month results in recent years. Civil engineering projects in the region reached a very high level in late 2021 and early 2022, when the construction of the Békéscsaba - Lőkösháza national public railway line and the Soroksár - Kelebia section of the Budapest-Belgrade railway corridor, as well as the Kecskemét-Szentkirály section of the M44 expressway, which totalled hundreds of billions of forints and are currently under construction, started.

The EBI Construction Activity Report is the result of a collaboration between three research companies, with iBuild contributing with project research and the project database, and ELTINGA Real Estate Market Research Centre and Buildecon Construction Economics Research contributing with the development of indicators and aggregation algorithms.

Cover photo (for illustration purposes only): Getty Images