Here’s how the Hungarian real estate market is affected by the historic low of the HUF
The Hungarian forint has hit a historic low in recent days. But how will this affect the Hungarian real estate market, and who will have a huge advantage under current market conditions?
The depreciation of the forint is still in progress, hitting 400 all-time lows on Monday. The sudden drop in the Hungarian currency is due to economic sanctions imposed on Russia following the Russian-Ukrainian war and the threat of gas cuts. Hopefully the current economic situation will not take too long, however, there could still be big winners in the Hungarian real estate market.
Since 2012, real estate prices are steadily rising across the country, and over the past 2-3 years, prices have started to rise sharply in the market. The Hungarian market is mainly dominated by retail transactions and domestic players who receive their salaries and take out mortgages in Hungarian forint. However, the current depreciation of the forint could give foreign investors a significant financial advantage.
This is especially true for those coming from the Eurozone as well as Switzerland, the UK, China and the US.
Numerically, the Hungarian forint has weakened 11-15% against major currencies since late February. This means that from the perspective of foreign buyers, house prices have also fallen sharply by 11-15%.
As the Hungarian news portal Portfolio reports, this could lead to a significant increase in demand, especially from Austria, Slovakia and Romania. If investors do not consider the current situation too risky, they could push up prices in the agglomeration areas of the large cities near the border, as well as in Budapest. The Hungarian capital is the main point of interest for Chinese investors, while Austrian and German buyers are mainly interested in the countryside.
Real estate is the best investment at the moment, according to an expert, although prices in prime areas may still increase by 100-200,000 HUF per m2 in the coming months – reported by 24.hu.
Even more intense changes are to be expected on the business real estate market, concerning offices, logistics, shops and hotels where companies invoice their transactions mainly in euros. In this segment of the real estate market, developers borrow their project loans mainly in euros (due to the fall in interest rates), while landlords and investors pay their rents in euros. Based on all of this,
the cost of renting a high-end office of 1,000 m2 has increased from 7.1 million HUF to 8 million HUF in the last two weeks.
For tenants, this is a sudden and significant increase in charges, which are also struggling with rising energy prices (companies do not benefit from rent reductions).
Additionally, rising construction costs will affect both residential and commercial real estate markets. After last year’s drastic increase, further growth can be expected this year as well, but this time for different reasons. Most building materials are imported, so prices have risen sharply as the forint exchange rate has deteriorated. This impacts all submarkets, including new housing and rents.
Source: portfolio.hu, 24.hu