After a significant increase in the second quarter, there was a decline: the value of construction work started in the construction industry decreased significantly between July and September In Hungary.
Although overall, the Activity-Starting ratio for the first three quarters of the year remained high due to the exceptionally good second quarter. Based on the investments in the iBuild project and company database, construction work in the sector has started in the total value of more than HUF 2 trillion, according to the EBA Construction Activity Report. The Activity-Start indicator, which characterizes the first 9 months of the year, exceeded not only 2020, but also 2019, the former by 24 percent and the latter by 4 percent. (Figure 1)
Figure 1. Construction activity: development and distribution of the value of construction work started by construction sub-markets (Source: EBA Construction Activity Report Q3 2021)
Minor building activity between July and September
Like the entire construction industry, high-rise construction was characterized by a weaker third quarter. The Activity-Start indicator was lower than the level of the first two quarters, although construction work in the sector started in a higher amount compared to the same period in 2020. In the first 9 months of the year, the value of the Activity-Starting ratio was almost HUF 1,500 billion in the first 9 months of the year, which was a 24% increase compared to January-September 2020, but also significantly higher than in the same period of previous years. .
The weaker third quarter was also observed for condominium construction and non-residential high-rise construction. However, due to the high start of activity in the second quarter, the amount of construction started in the period between January and September exceeded that observed in previous years, by 31 per cent in 2020 and by 36 per cent in 2019. Among the projects entering the construction phase in the 3rd quarter of 2021 is, for example, the renovation of the New St. John’s Hospital and Clinic in the North Central Buda Center. But in addition to the construction of several office buildings and industrial warehouses (these will be described in detail later), the construction of the Aria Residences hotel and the construction of the Szekszárd Knowledge Center have also begun.
In the condominium housing sector, after the weak second quarter, the third brought even smaller Activity Starts, the value of the constructions started in the first 9 months was only 14 percent higher than in the same period of the already poorly managed 2020, and far below the level of previous years. .
Civil engineering has lost momentum
As in the case of civil engineering, the third quarter of 2021 brought a decline in civil engineering, and after the outstanding second quarter, a fraction of the number of constructions started in the sector, according to the EBA Construction Activity Report. This phenomenon was also true for road and railway and non-road and railway civil engineering. Thus, the activity-start indicator of civil engineering in the first 9 months exceeded the same period in 2020 (+ 15%), but it was significantly lower than in previous years. Among the largest civil engineering projects launched are the construction of the Sajószentpéter and Berente bypass sections of the 260 main road and the works of the Gesztely to Szerencs section of the 37 main road.
The constructions started to be more evenly balanced
In the third quarter of 2021, the largest share of construction started in the eastern regions, but overall, in the first 9 months, the western regions had the largest share of the total value of construction started, the share of which exceeded that of previous years. Overall, the lowest level of construction started in January-September, despite growth in the third quarter. (Figure 2)
Figure 2. Territorial distribution of the total value of construction works started in some regions of Hungary (Source: EBA Construction Activity Report, Q3 2021)
Housing construction is difficult to start
From 1 January 2021, the VAT rate on new dwellings has fallen again to 5 per cent from 27 per cent in 2020. Nevertheless, there is no sign of a significant increase in condominium housing construction yet. Compared to the first quarter, fewer condominium construction projects started in the second quarter, followed by a further decline in the third quarter. Although it is still true that due to the better first quarter, the value of the Condominium Housing Activity-Start indicator in the first 9 months of 2021 was 14 percent higher than in the same period in 2020.
Thus, the construction of condominiums is difficult to start despite the VAT reduction. According to the statistics of the CSO housing permit, simple notifications played the main role in the increase in the number of permits this year. This may be due to the fact that, since last fall’s announcement, developers have not had enough time to prepare for major investments, permits have not yet been obtained, and construction will only be able to follow. Overall, however, as a result of the VAT reduction, we still expect the start of activity in condominium construction to pick up in the future. Especially since the recently launched “green” loan could give an extra boost to demand for new housing.
Between July and September, the value of completed condominium investments was roughly at the level of the second quarter, thus falling short of previous expectations due to slippages. In the first 9 months of the year, a total of HUF 208 billion worth of condominium projects were handed over.
As in the first half of the year, for the first 9 months, most condominium construction started in the Central Hungary region. Although the rest of the country experienced a proportionately higher Start-up in the third quarter, they still lagged behind their share in previous years. Only 10 percent of construction projects started in the eastern regions and 18 percent in the western regions, compared to 72 percent in Central Hungary between January and September.
What did the year bring in office, plant and warehouse improvements?
Source: Ingatlanhírek by ingatlanhirek.hu.
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