Wavering performance, improving order book
According to the statistics, the industry contracted by 11.4 per cent year-on-year in January 2026, while February brought a monthly correction of 4.9 per cent — a positive signal but not yet a trend reversal. Total performance over the first two months remained 5.7 per cent below the 2025 level. The details already split the picture. Building construction recorded year-on-year growth of 15 per cent, while the segment with the largest weight, specialised construction works, declined by 9.3 per cent. The remarkable 37.6 per cent February growth in road and rail construction was largely offset by a 41.6 per cent contraction in utility construction.
The order book at end-February exceeded the level a year earlier by 9.5 per cent, with contracts for civil engineering structures expanding by 14.4 per cent within the total. This signals that the order base for the coming period is being built up in the background, although it has not yet reached the execution stage. The volume of newly concluded contracts in February was nevertheless 44.8 per cent below the same period of the previous year, which calls for caution, as fresh orders project the production level six to twelve months ahead. Over the past two years the sector has been unable to break out durably from a near-stagnation state, and compared with the 10 to 15 per cent annual expansion of the 2018 to 2021 period, considerable growth potential has accumulated at domestic businesses.
GDP contribution and the role of lending
Construction is a multiplier industry. Every new investment indirectly mobilises material production, logistics, design, mechanical services and related trade. A larger residential construction wave can produce up to 1 percentage point of additional GDP growth if 10,000 new housing units of capacity are built. In the full year of 2025 the industry recorded 2.8 per cent growth and contributed positively to GDP growth. In the first quarter of 2026, however, construction performance is not supporting economic growth — a pickup is expected to begin in the spring and summer months.
On the financing side the picture is mixed. On the household side, subsidised home creation and mortgage schemes, running for more than a decade in various forms (CSOK, rural CSOK, Babaváró, and from September 2025 the Otthon Start programme), are persistently present. Since the launch of Otthon Start more than 25,000 mortgage contracts have been concluded, the disbursed amount exceeds 850 billion forint, and around 70 per cent of mortgages are extended within this framework. The demand effect of the subsidised programmes is, however, no longer a new factor. Alongside their stimulating role, their impact on price dynamics is also debated, since subsidised demand has in part contributed to the significant construction and real estate market price growth of recent years. Property prices in some segments accelerated above 20 per cent year-on-year at the turn of 2024 and 2025, before the rate of growth fell to nearly zero by December — a market settling that is currently underway.
Corporate lending, by contrast, is essentially not functioning on a market basis at present. At high bank funding costs a construction development can rarely be financed at a sustainable interest level. The only realistic channel is the Széchenyi Card Programme and similar subsidised credit schemes — these, however, are typically exhausted in moments and cannot cover full corporate demand. The market is awaiting a predictable economic and monetary policy. Forint strengthening could open the way for a central bank base rate cut, which over the medium term may bring corporate lending back to a market-based mode of operation, normalising the financeability of construction developments.
Renovation market — an open question on the next chapter
The renovation segment was affected by a sensitive step. The 5+5 million forint household home renovation support framework was suspended in April. Whether a new programme will replace it, and on what terms, is currently an open question. The market is understandably waiting it out, while a portion of contractors is reorienting toward new client segments. Some are moving into the new-build segment, others toward higher value-added energy modernisation, heat pump and smart-home integration work. The latter segment offers more stable margins, and the customer base is less sensitive to fluctuations in support schemes.
The renovation market holds vast, partially unused capacity. The energy modernisation of Hungary's ageing housing stock represents a reserve spanning a decade. The question is when, and in what form, active state support will resume.
Wages and building material prices — moving together
Industry wages will grow on average by around 5 per cent in 2026, somewhat below the around 6 per cent wage increase intent prevailing across the broader economy. The construction labour rate, however, has risen by close to 16 per cent over two years, driven by the 14 per cent rise in the guaranteed wage minimum, supplements, protective equipment, temporary facilities and the increase in banking costs. The guaranteed wage minimum rose by 7 per cent in 2026 and the minimum wage by 11 per cent, which radiates indirectly across the industry. To avoid wage tensions, employers typically also raise pay for higher earners. On building material prices, the stabilised 5 to 7 per cent path of recent years tilted in spring. Looking back, construction producer prices peaked at over 26 per cent year-on-year at end-2022, then a marked disinflation took place during 2023 and 2024, with the index stabilising around 5 to 7 per cent. This moderate pace was also maintained in 2025. In spring 2026, however, global energy and raw material market tensions, the price rise of oil derivatives, exchange rate volatility and increased freight rates jointly triggered a 10 to 25 per cent price increase wave starting in April on the domestic building materials market, with 20 to 50 per cent rises in some raw material segments. The 2026 annual price rise is expected to be in the 6 to 8 per cent range overall, with higher figures in some product categories.
The cost effect runs through the entire supply chain, from raw material through transport to the finished product. Whoever can secure building materials at stable prices and reliable availability now stands to gain a competitive advantage over the coming months. The higher price level, moreover, is likely not temporary — the industry will need to adjust over the longer term as well.
Public procurement market — wider competition, new priorities
The public procurement market has narrowed in waves over recent years. Many state investments halted or were postponed indefinitely, while strong concentration developed on the bidder side. This is now visibly easing. The market is becoming more open again, more businesses can appear in the same tenders, and this brings livelier price competition. Greater competition can directly improve construction prices — from the same state or EU resource, hopefully more investments are realised, while overpriced public procurement and the monopolistic past gradually move behind us.
From the bidder side this is a double-edged sword. In the short term it can pressure margins. If the room to bid even more cheaply narrows while material costs rise, profitability deteriorates. Over the longer term, however, a healthier market structure may emerge, where technical quality, fast turnaround time and reliable performance become the competitive advantage rather than tender market power.
The priorities of state investments are also changing. Instead of the previously dominant heavy-engineering and prestige projects, hospital and educational institutional infrastructure development may move to the foreground — areas where the accumulated backlog is significant and where the social return is quickly perceived. This requires a new type of preparedness from contractors. Healthcare and education investments come with stricter technical content, specialised mechanical systems and higher sustainability requirements.
EU funds — a double channel for the industry's benefit
EU tenders may have a significant impact on construction over the coming years through two distinct channels. The first channel is indirect. Domestic contractors take on the construction works of new industrial facilities, manufacturing plants, logistics centres and energy projects, which represents a more stable, predictable order base. This is especially valuable in a period when the structure of state orders is shifting and the developer side is also more cautious. Industrial investments typically come with higher technical content, specialised hall structures and mechanical systems, which also provide higher margins for contractors.
The second channel is direct. Construction firms can carry out their own technological developments under their own tender applications. The industry has a great need for this. The digitalisation level of Hungarian construction lags in international comparison, and mechanisation is essentially the only realistic answer given the shrinking labour market. Skilled labour shortage is a persistent factor. The younger generation enters the sector only to a limited degree, while construction demands remain unchanged or grow. Specialised machinery and tool manufacturers continually bring new solutions to the market — precision concrete and plastering systems, automated welding and assembly machines, robotised tiling and painting equipment, drone surveying, laser levelling, and BIM-based design, execution and handover integrated systems. These are all areas where a single well-written EU tender can determine a medium-sized construction firm's competitiveness for years.
The combined effect of the two channels is the most important. Stable revenue from the construction of industrial facilities is paired with technological development, which in the medium and long term improves the productivity, cost efficiency and market competitiveness of domestic construction businesses. Whoever moves now will start the next cycle from a substantially stronger position.
Chain debt, liquidity, grey economy
The structural problems of the sector are also on the surface. The chain debt stock currently stands at around 300 billion forint, causing severe liquidity issues for many small and medium-sized businesses. The shrinking order book and the sharp price competition have brought dramatic profitability declines at many firms. With this, the appeal of the grey economy, the risk of quality deterioration, and the number of disputed performance certifications and ensuing lawsuits also grow. A key question for the health of the industry is whether the pickup in competition will not push the market into a survival logic where the cheapest offer always wins regardless of technical content.
On digitalisation, Hungary stands at the back in international comparison. Modern tools are already available in the design and manufacturing areas, but as one moves toward execution and operation, information often disappears, leading to coordination errors, redesigns and quality risks. Two-thirds of the profession see Hungarian construction's digitalisation as slow and lagging international levels.
Where is the industry heading?
Despite the current fluctuations, medium-term outlooks are improving. The increasing prominence of institutional investments, industrial works arriving via EU tenders, own technological developments, the settling of the renovation support landscape, the more open market competition and the prospect of a more predictable monetary environment can together provide sufficient demand for the sector to overcome the current low point.
2026 calls for a survival strategy from market participants — strict cost control, predictable project planning, well-chosen client portfolios and an opening toward higher value-added services. Whoever prepares now, by diversifying, digitalising, mechanising and raising efficiency, can stand on the starting line strengthened for the next major upswing. The industry's long-term catch-up potential remains intact — compared with neighbouring Central European countries, Hungarian construction's production value and business structure are considerably smaller, so the growth reserve is significant.
