Central European Construction Market Report 1Q 2023
Hungary
Gross domestic product
Hungary experienced slow gross domestic product (GDP) growth in 2022, predicted to produce minimal increases over 2021. The local Consumer Price Index (CPI) recorded well above the European Union average, which is no surprise considering the challenges it has suffered since the war started in neighbouring Ukraine.
Despite the difficulties faced across the local economy and construction industry, the most recent data available (up until November 2022) shows that construction production has continued to increase year-on-year, as can be seen in the table included later.
Construction materials
Industrial producer prices up until November 2022 show that steam and air conditioning supply saw an alarming increase during the last quarter. Gleeds recommends close monitoring and adjusting project estimates immediately.
Electrical distribution items also increased in the second half of the year but remained at 85% over 2019 pricing. Wood, glass and clay maintained an 80% average inflation over 2019 pricing, while structural items such as concrete and steel have stayed around 50%.
These inflationary indicators are only partial considerations when considering a complete construction works contract that also includes contractor preliminaries, skilled labour and other auxiliary measures for completion of the project.
The construction industry remains affected by the full cost of rising energy prices.
Contracts
Due to high inflation, investors are exploring contract options with price escalation clauses to protect all parties.
Market outlook
Limited resources, increased fuel costs, high volatility and the ongoing war in Ukraine are resulting in general uncertainty. Whilst outputs of residential and commercial sectors have suffered due to rising interest rates, the need to simplify the supply chain has increased the demand for industrial and logistics construction.
The main price index for building materials (data up until November 2022) shows a 27% increase since November 2021, supported by a similar index by building type, indicating between 25 – 28% inflation since the previous year.
Gleeds recommends revising previously set project budgets to present day figures based on local statistical information, our own internal data and 2023 forecasts. Additionally, we are advising investors to consider inflation contingencies in their budgets as materials and labour shortages remain unpredictable.
