Construction has declined, but there is also good news for builders

According to raw data, the volume of construction output in April this year was 3.2 per cent higher than a year earlier, but the performance of the sector decreased by 5.9 per cent compared to March of the previous month. Central Statistics Office from the latest data.

Of the output of the main groups of constructions, the construction of buildings decreased by 1.2 per cent, while that of other constructions increased by 11.4 per cent compared to the spring of last year.

Construction output, along with a decline in April, rose 12.1 percent in the first four months. The volume of contracts held by construction enterprises at the end of April was 8.0 percent higher than at the end of April 2021. The volume of contracts for the construction of buildings decreased by 8.8 per cent, while the volume of contracts for other constructions increased by 20.6 per cent year-on-year.

Retail investment sentiment may persist

In the second half of last year, the construction industry had plenty of orders, so it had a very strong year behind it. This year, however, the sector’s order book has declined as a number of public investments have been postponed. At the moment, it is not possible to say whether the rate of decline will be 5 or 15 percent by the end of the year, László Koji, president of the National Trade Union of Construction Entrepreneurs (ÉVOSZ), told the Index, who also said that the 2022 In the first three months of the year, the volume of construction output was 15.7 percent higher than in the same period of the previous year, and the events of the war command the construction industry to stop soaring.

In the sector, for example, there will be a shortage of government and community orders, much of which have been postponed. Minister of Economic Development Márton Nagy recently announced that the government will carry over a total of HUF 861 billion in investments to the coming years.

Despite the decision, the president of ÉVOSZ is optimistic about this year, because according to him, the construction industry will still spend HUF 5,500 billion.

According to László Koji, this amount can be achieved even if the 2022 budget already contains 500 billion fewer public orders. In addition, it can already be assumed that many large-scale investments will start much later next year.

Due to the postponements, the construction industry will be able to lose about HUF 1,100-1,200 billion in public orders in 2022 and 2023. According to the President, this deficit could be filled from the residential side, but in his opinion the sector can only count on the citizens in the future if the government freezes the interest rate on housing loans to around 5 percent and if the 5 percent VAT can be applied to newly built single-family homes. would make it indefinite in the future.

The EU could help the market for imported goods

For the time being, no one except the state is experiencing a decline in the desire to build, even if we know that the price of construction materials has risen drastically, the president of ÉVOSZ concluded, who said that the construction industry has a very large interest in imports. About fifty percent of the raw materials come from abroad, the pricing of which is greatly influenced by the Russian-Ukrainian war and the weak forint. This situation is compounded by the fact that so far we have typically bought steel, wood, copper and aluminum-based products from Russia, Ukraine and Belarus, but we cannot do so now, the President said.

That is why Hungary has to source the substances listed above from alternative import markets, but current EU regulations do not allow this. That is why the various quotas and tariffs would have to be rethought quickly under the leadership of Brussels, because then the Hungarian market would be supplied with Chinese, Turkish or Iranian building materials, for example, said László Koji.

The good news is that the price of wood and steel has fallen

The price of building materials rose 80 to 150 percent last year: typically the prices of rock wool, wood and steel soared. And although the war in the neighborhood, the rise in energy prices, and the weak forint trio are not really conducive to domestic prices, some light can be seen at the end of the tunnel: the prices of wood and steel have started to fall somewhat.

Of course, this price rebalancing between 5 and 10 percent is still a fraction of how much the market has risen, but according to the president of ÉVOSZ, prices will settle in the construction products market by the end of the year, so there will be better planning and easier planning in 2023. calculate the cost in advance.

(Cover image: Akos Stiller / Bloomberg / Getty Images)

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