Hungarian construction prices rise despite falling demand

Hungarian construction prices saw a quarterly increase of 1.9% in the first quarter, pushing the annual price dynamics up to 5.3%. This rise persists despite cost reductions from imports, driven by weaker demand and a stronger exchange rate. The continued significant increase in construction prices acts as a limiting factor for a potential recovery, according to an analysis by Dániel Molnár.

Significant uncertainty continues to cloud the outlook for the construction industry. While order books in some segments, particularly "other structures," suggest future growth, and housing construction benefits from government programs like the Housing Capital Program and the Home Start Program, caution prevails in the corporate sector. This uncertainty is dampening investment willingness.

Although business confidence has gradually improved in recent months, it still reflects a predominantly negative sentiment in the Hungarian economy, negatively impacting investment decisions. The stabilization of the construction sector may eventually be aided by increased demand generated by incoming EU funds, with effects expected towards the end of the year.

A key question remains how much of this demand will translate into price increases, which could undermine efficiency. The utilization of EU funds is therefore critical, with the potential for price hikes posing a risk to the sector's recovery.

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Or, the cost reduction appearing in import prices due to weaker demand and a stronger exchange rate, construction industry prices are still rising significantly, which can thus appear as a limiting factor in the recovery.