Europe Biannual Construction Market Report 3Q/4Q 2024
Hungary
Top opportunities:
Green and sustainable building initiatives: Increasing focus on sustainable construction and green building practices presents opportunities for the construction industry.
Digital transformation and innovation: Embracing digital tools and technologies such as artificial intelligence can streamline operations and improve project outcomes.
Top risks:
Economic instability: Economic fluctuations in Hungary (e.g., the Ukraine war and no EU funding due to political reasons) can impact investment in construction and infrastructure projects.
Talent retention and skill gaps: The Hungarian construction industry faces challenges in attracting and retaining skilled professionals.
Local economic indicators
Gross domestic product (GDP)
Hungary's economic pulse quickened in the first quarter of 2024, with the Hungarian Central Statistics Office (HCSO) revealing in its most recent report a robust 0.8% increase in GDP compared to the previous quarter, 4Q 2023. On a year-over-year (YoY) basis, GDP grew by 1.1% when seasonally adjusted at constant prices.
Eurostat supported this trend, reporting an equal growth of 0.8% over the previous quarter and a slightly higher figure of 1.7% YoY. This surge was driven by improved performances across various sectors, notably construction, services and information services. However, despite a slight dampener in the manufacturing sector, Eurostat's gross value added (GVA) data of Hungary's construction sector saw a commendable 1.1% increase from the previous quarter and an even more substantial 3.4% rise YoY. As a result, the construction industry's share of Hungary's overall GDP climbed to 5.5%, up from 5.3% in the preceding quarter.
The Organisation for Economic Co-operation and Development (OECD) maintains an optimistic outlook, forecasting Hungary's GDP growth at 2.1% for 2024, with a further uptick to 2.8% in 2025.
Inflation
According to the HCSO, inflation in Hungary has significantly stabilised since the tumultuous months of the past, with rates in 2024 now oscillating between 3.6% and 4.0%. The latest figure for June stands at a reassuring 3.7%. This marks a stark reduction from the peak of 25.7% witnessed in January 2023, signifying a substantial improvement in price stability.
Eurostat's harmonised index of consumer prices (HICP) echoes this sentiment, reporting a 3.9% inflation rate for May, with June's figure expected to show relative stability. Despite these positive trends, the OECD maintains its earlier forecast of 4.0% inflation for 2024, with a slight decline to 3.9% anticipated in 2025.
Construction materials
The pricing landscape of local construction materials has remained relatively tranquil on a month-over-month (MoM) basis, with the most significant change being a notable decline in the price of glass and glass products, -1.8%. However, on a YoY scale, there is a discernible trend of price recovery for most industrial producers. Notably, electricity prices have experienced a substantial 13.0% decline, albeit from a comparably high starting point.
Referencing December 2019 figures, though still persistently high, electricity, gas, steam and air conditioning prices are exhibiting positive movement, reflecting the noted monthly and yearly price recovery.
See the following table for month-over-month (MoM), YoY and indexed pricing inflation:
Market outlook
In June 2024, Hungary witnessed a slight worsening in its construction confidence indicator, which fell from -17.4 to -19.5, with the average figure for 2024 so far being -20.1. This downward movement was primarily propelled by a downward shift in the evolution of current overall order books, which fell from -32.5 in May to -35.6 in June. Additionally, a slight negative movement in employment expectations for the next three months, from -2.2 to -3.4, contributed to this trajectory.
Hungary's construction market continues to grapple with significant challenges, particularly concerning insufficient demand and labour shortages, with figures of 51.0 and 27.1, respectively, reported in June. However, there's a glimmer of hope as price expectations for the next three months continue to improve, showing a strong figure of 3.1 in June, contrasting with the January–May 2024 average figure of 17.5.
Experts in our local office observed exceptional inflation of 30% in tender prices throughout 2023 in the Hungarian construction market, driven by supply chain disruptions and increased material costs. However, the outlook for 2024 appears more optimistic, with expected tender price inflation significantly reduced to 10%. This anticipated decrease is attributed to stabilising supply chains and the implementation of cost control measures by construction firms.
Additionally, there is a noticeable shift towards sustainable building practices and green technologies in Hungary. This trend presents new opportunities for growth and innovation within the industry. Companies investing in eco-friendly technologies and sustainable construction methods are likely to gain a competitive edge.
Furthermore, the digital transformation of the construction sector continues to accelerate. Despite ongoing challenges, the Hungarian construction market is gradually adapting to new economic realities. By prioritising sustainable practices, embracing digital tools, and addressing labour shortages, the industry is poised for a more stable and resilient future.
As always, Gleeds advises regular project budget updates considering recent market pricing and local risk factors that may impact project programmes and costs. Undertaking risk analysis studies enables better evaluation and preparation of appropriate contingencies for your particular project conditions and risk exposure.
