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Economic Growth of Hungary s Construction Industry

Posted on 13 October 2016 by KenResearch Manufacturing And Construction,

There has been enhancement in residential construction in terms of buildings permits.

According to statistics, new construction permits issued for residential buildings grew by 27.2% in 2015, increasing from 5,132 in 2014 to 6,526 in 2015 and the total floor area of new building permits grew by 27.1%, going from 1,082,916 million in 2014 to 1,376,406 million in 2015.

During 2016-2020, it is expected that there will be an increased transportation of goods which will create a need for efficient transport infrastructure.

Ken Research recently published a report on, “Construction in Hungary – Key Trends and Opportunities to 2020 which provides a detailed analysis of Hungary’s Institutional Construction industry. Category-wise coverage of different segments in the industry is also included in the report. The projects launched by the government for enhancement of the sector are explained in this report. Additionally, major trends and drivers have also been covered, describing the market penetration and future potential of the industry. Commercial, industrial, infrastructure, energy and utilities, institutional and residential are the categories on the basis of which segmentation is done.

It is estimated that around 42% of labor force in construction will have high level qualification as compared to 29.7% in 2013.During 2011-2015 the Hungarian construction industry posed an optimistic growth. Due to recession in 2012, the economy was hit badly and construction activity went weak due to which business confidence of investors in construction industry got shaken. Investments got badly affected but due to improvement in economic conditions, the construction industry subsequently recovered and new investments started emerging. During 2016-2020, the construction industry is expected to expand but at a slow pace. It is expected that there will be accumulation of funds into infrastructure, energy and utilities, and commercial construction projects due to improvements in investor and consumer confidence. Government will also take initiatives and launch programs like Integrated Transport Development Operational Program (ITOP), Environment and Energy Efficiency Operational Program (EEEOP), National Renewable Energy Action Plan (NREAP) and Family Housing Allowance Program (CSOK) in order to supplement industry growth. In order to improve transport infrastructure and develop regional connectivity, Government has taken lot of efforts that will support the industry’s growth during 2016-2020. Plans are designed to increase the nation’s energy production in order to support funding in energy infrastructure projects. In real terms, the industry’s output value increased at a compound annual growth rate (CAGR) of 3.55% during 2011-2015 while is expected to post a CAGR of 2.74% for 2016-2020. Hungary being a landlocked country plays indispensible role in improving the performance of its logistics industry. According to the Központi Statisztikai Hivatal (KSH), the total volume of goods transported within the country grew by 1.6% in 2015 compared to 2014. Roads followed by railways, pipeline and water transport accounted for 84.8%, 7.8%, 7.3% and 0.1% respectively of the movement of goods in 2015.

The government is planning to construct two new nuclear reactors at the Paks Nuclear Power Plant to increase electricity generation capacity. Accordingly, the government entered into an agreement with Rosatom, Russia’s State Atomic Energy Corporation, in January 2014. Compared to the first half of 2014 the number of foreign tourist arrivals grew by 17.6% during the first half of 2015. In order to foster rapid development of construction industry, the Government has taken rigorous steps like hiking public investment, strengthening the access to funds available in the new EU financial programming period, enhancing the performance of public duties such as health, education, the social domain and public administration and cutting down taxes wherever it is crucially required. Regions like Budapest, Győr and Kecskemét, where stable demand in housing market has already lured several real estate investors, the reduced 5% VAT on housing construction between 2016 and 2019 is expected to play a vital role in the recuperation of construction sector and the supply side in the rest of the country as well.


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