Project starts

Analysts of the EBI Construction Activity Report also examined the extent to which the epidemic changes the value of newly started construction works. For this, they tried to extend the period under review as much as possible, so instead of the first three months, the comparison was made between the beginning of the year and 24 April. They looked at the value of projects entering construction phase between 1 January and 15 March and also determined the value of construction started between 16 March and 24 April, which was compared with the figures for the same period of the previous year.

They have found that the construction industry this year started off well, with construction works starting at a higher value before 15 March 2020 than in the same period a year earlier, although fewer projects shared this value.

The epidemic then battered the sector, bringing a major decline between mid-March and 24 April.

• The value of new construction projects nosedived mainly in civil engineering, with a drop of more than 90%. As for the number of projects started, as already noted, fewer projects started at the beginning of the year than last year.
• In building construction, the number of projects entering construction phase was 10% lower, but in the weeks of the epidemic, this decline was almost 40%.

Of course, we do not yet see the fate of projects that have not started. It is possible that their construction will start in the rest of the year, but this will likely depend on the development of the epidemic.

EBI experts estimate that if the decline persists for half a year, the epidemic alone could reduce construction output at current prices by 15%.

Project stops and delays

Experts of the EBI Construction Activity Report also tried to gather as accurate information as possible on previously started projects broken down to country, region and sector in order to see how much harm the epidemic has caused in ongoing construction works.

The sample was based on data from 1583 ongoing construction projects between March 15 and April 20, which were updated in the project database by iBuild staff. The study thus covered a total of 446 residential, 727 non-residential and 410 civil engineering projects, but during the collection, they also made a distinction based on the nature of the work by dividing projects into new constructions and renovations.

Based on the project updates,

• 7 of the projects stopped;
• in the case of 480 projects it was thought that it would take longer to complete them than expected;
• in 93 cases it was believed that the project could be completed even earlier than planned;
• in the rest of the projects the planned completion date was not changed.

Stopped projects were mainly smaller residential, office and hotel buildings, probably because in case of larger projects developers have more opportunities to reorganize works and they have better material procurement channels. It is also in the interest of construction material producers to retain their bigger customers, so meeting their needs can be a priority. Based on the sampling, the biggest projects were delayed less.

Analysts of the EBI Construction Activity Report also examined the change in the median (typical) construction times between March 13 and April 20 for ongoing projects. Figures show that expected construction times grew, though there were major differences between segments. The smallest change was observed in civil engineering where construction time rose by only 2.7%, while in residential construction time grew by 5.8% and in non-residential construction, it increased by 5.4%.

There may be several factors behind it. In the case of the latter, it may have become harder to procure certain materials, while work organization and uncertainty regarding demand may also have played a role. The change compared to previous construction times was also different regionally: the biggest difference was observed in Western Transdanubia. There was also a difference in the elongation for renovation works and new construction works as well, with the latter altering by 4.3% and the former by 6%.

Completions

An estimation was also made for the approximately 3,400 ongoing projects, assuming the epidemic affects all projects similar to those in the sample. They calculated the altered completion values expected in each quarter and then they compared them with the probable values without the epidemic (assuming no project stopped from March 15 on, or if a project’s construction time got longer due to the epidemic, they have shortened it, and if it was shorter, they have lengthened it.) Results show that there was a massive decline in the value of completed projects already in Q1 2020.

The value of the activity completion indicator of the EBI Construction Activity Report in the domestic construction industry decreased by 29% due to the epidemic.

Projects are to be completed with delays in later quarters, though Q4 2020 and Q2-Q3 2021 may be characterized by a major drop compared to the numbers without the epidemic. The biggest drop in completion was registered in housing projects and hotel projects compared to non-epidemic figures: in both cases, the value of Activity Completion Indicator was down by more than 50%, as per the sample estimate.

Overall, completion of building construction works was more strongly affected by the epidemic, with the value of projects completed in Q1 falling by 38% against the estimate without the epidemic. In civil engineering projects, the difference was only 9%.

For the rest of the year, a key question in terms of expected delays may be how long the uncertainty will last and when trade in construction materials will recover. If construction projects are plagued long, a further slowdown may come, which could then worsen numbers in the coming quarters.