Will this Budapest district be the new favorite of real estate developers? – What can the construction industry expect on the customer side?

By RockedBuzz 10 Min Read

It can enable the construction of nearly 6.5 hectares on 10 hectares of real estate in the city center in the 18th century. district. While the developments in the capital have so far been more concentrated along the Hungária boulevard or in the inner districts, the district is confident that the concept will also put the area around Üllői út on the real estate development map. The deputy mayor highlighted that, due to the international airport, the district is one of the most important gateways to the capital, which, despite the population of 100,000, has preserved its garden-city character. 10 percent of the district is currently forest. Although there has not been too much real estate development near Üllői út in the past period, it is a good potential investment area where the following transport developments will be realized in the next decade:

  • renewed Gyömrői út
  • new pedestrian crossings
  • new cycle paths
  • multi-level crossings
  • fixed track developments: today the Nyugati railway station is 20 minutes from here
  • The extension of tram 42 and tram 50, as well as the renovation of Üllői út will also be a product of this year, in addition, more green areas, new parking options and a more livable garden city environment will be created

On Üllői út, there is already a regulatory plan for new construction there, which includes the preservation of a kind of urban, garden city character. “This will never be a Váci út corridor, new developments can be created in a livable environment in the dozens of areas that await potential real estate developers.” Péter Kőrös emphasized.

What can the construction industry expect on the customer side?

How does the central bank see the schedule of investments in the short and medium term? How does the Liget project continue? In which segments are real estate developments starting today? The central management of public investments and their limitation to legislation now seem to be implemented, what should be paid attention to in this regard? What does it take to have more private investment? Experts in the sector discussed these issues, among others Dr. Ernő Takács, Deputy CEO, Hotels, Retail Projects, WING Zrt., IFK President in its moderation.

According to the majority, there could be a 25-50 percent decrease in the volume of construction industry investments compared to 2022, while the ideal ratio of private and public investments would be 60-40, or even 80-20 percent, according to the public.

“In 2023, investments will decrease both on the public and private side, but in the private sector, 2024 will be better, and we expect growth there. In terms of start-up investments, we see that the private sector has started to dominate, and this weight of around 60 percent will remain. In 2008, there was a very risky financing system in Hungary, the consequence of which was that lending decreased for 5 years. Now, however, the banking sector has very high liquidity and high capital adequacy ratios, so we are entering the challenging period with a very stable banking system. The banks have tightened the conditions a lot and are thus faced with a lower demand. The more expensive financing compared to the previous very good period is indeed a significant change, but the banking system will continue to be able to provide stable financing to the corporate sector. In the real economy, this year is behind last year, there may be an increase of between 0.5-1.5 percent, but as soon as the environment normalizes, the factors will also improve.” he said Ádám Banai PhD, executive director responsible for central bank instruments and foreign exchange reserve management at the Magyar Nemzeti Bank, who added that he believes in anti-cyclical policy, that is, in order to start long-term developments, a stable order stock is needed even over a decade.

“Ten years ago, it first came up that there should be an attraction in Budapest that is constantly changing and where newer and newer cultural content appears. Around 2012-13, we were just in recovery, with zero tower cranes in the city, but since then there have been years when dozens of cranes were working simultaneously across the city. Around 2015, we got so far that the projects that will define the image of the city for decades appeared on both the public and private side. At the moment, we have no half-finished investments, but I don’t see that our developments that are still on the planning table will start in the near future. However, the plans are ready, so they can be launched quickly if necessary.” he highlighted Dr. Benedek Gyorgyevics, CEO of Városliget Zrt.

According to the expert, the construction law is a necessary direction. For decades, the state appeared as a kind of infrastructure developer, road construction, etc., but after 2014-15, its presence also became stronger in the high-rise construction market, while regulation did not develop along with it. The current situation seeks to remedy this. In the next period, it will be able to put the Hungarian suppliers and contractors in a sufficient position, the aim of which is that they will be able to stay alive in the next period as well. State investments must guarantee predictability and security in order to ensure predictable capacities, and it is also important to create magnet investments that can initiate the development of a given neighborhood.

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“New investments are starting in decreasing numbers, the existing ones have yet to be finished, but the new ones are constantly being redesigned. There will continue to be investments in prime locations, even offices, but in smaller numbers than before. In order for more private investment to start, partnership and predictable cost levels are needed. As a private market investor, it is a pleasure to follow state developments, because it means less risk, but the goal is that the state does not overheat an overheated market with its orders, but rather balances it out.” he emphasized Sándor Makra, CEO of Market Asset Management.

“There are still huge investments in the industrial segment, we can even think of the automotive industry and these will continue. Electromobility investments have to be made despite the decrease in the automotive industry due to the EU “green deal” directives. Our own investments are also realized. The more efficient the construction industry, the greater the demand. In terms of industrial investments, we will achieve last year’s record levels this year as well, but there may indeed be a decrease in other segments. The state must ensure certain developments for investments, for example utilities, today this is one of the bottlenecks, the other is the banking system, which is fine, but the international exposure of the Hungarian economy represents the risk for the domestic banking system. In terms of regulation, protectionism is important, but everyone has a role in the value chain, construction risks are not to be solved by real estate developers. State investments are really needed during a recession, but at the same time, inflation helps to manage public debts, so the state can appear as an investor sooner. Protectionism is important, but public investments often act as indulgent incubators, which causes damage to the private sector as well.” he drew attention Ádám Székely, managing director and owner of Infogroup.

Source of images and cover image: Kaiser Ákos / Portfolio

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