Negative prospects in Hungarian construction industry: stalled projects, bankrupt contractors

Rising vacancy rates, declining investment flows, rising yields and the potential risk of property depreciation are the main findings of the latest report on the commercial real estate market published by the Magyar Nemzeti Bank (MNB).

High energy costs are usually the main topic of discussion when it comes to the future of businesses. However, the high and rapidly changing price of building materials should not be forgotten either. This remains a problem in property development and construction. In the near future, given the risks of price rises, the most viable real estate developments will be those where there is greater transparency and closer cooperation between the developer and the contractor.

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There is currently a lot of uncertainty in the construction materials market in terms of prices. This is illustrated by the fact that there is no operator able to give a quotation with a validity of more than 30 days, Portfolio writes.

What has risen most in price?

According to market experts, since May 2022, the price of cement, steel, mineral fibre insulation and chemicals has risen most. Their production is linked to energy-intensive industries. The price of cement has risen by more than 100 percent in the four months since may. Several building material groups have also seen price increases of up to 50 percent.

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In the construction sector, the volatility of the euro exchange rate is also a problem due to the high import rate, Portfolio writes. Looking ahead, expectations are mixed on the likely price developments for building materials. Some say that if the expected economic slowdown does not shut down building material factories, building material prices could fall. Others argue that there will be no downward movement in construction material prices, leaving the sector vulnerable.

László Koji, president of the National Association of Construction Contractors (Építési Vállalkozók Országos Szakszövetsége, ÉVOSZ), said in an interview with hvg.hu that new orders have fallen so much that the sector’s performance could drop by 15 percent in 2023-2024.

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Source: Portfolio, hvg.hu