The Hungarian real estate market is in trouble

Inflationary risks and side effects are increasing in the housing market, where demand is expected to fall in the near term. This is due to more expensive credit, which can lead to a slowdown in construction and purchase. Keep reading below for more information.

The upward impact on house prices triggered by the postponement of demand during the pandemic and advanced by the rise in credit rates is fading. All the while, investor participation is back above 40%. With high inflation, some of the money seeks refuge in real estate. Many investors, on the other hand, have become active sellers, as they now enjoy the returns they earned on their previous home purchases. Earnings from recent record high prices are up, TB reports.

The Hungarian real estate market will stagnate

Tünde Tancsics is an analyst at the Eltinga Real Estate Research Centre. The expert from the research center, known for his reports on the housing market, explains the following. “The housing market will inevitably slow down. As demand is now falling and the growth that has been going on since 2014 now looks almost over.

She adds that in nominal terms, prices will increase with inflation of 10 to 12%. But in real terms, a gradual depreciation could already start to happen as demand slows.

The first quarter and prior year saw record price increases, as delayed pre-purchase demand during the pandemic and leaking lending rates hit the market at the same time. Home purchases, mostly on credit, have been hampered by rising credit costs and steadily rising prices. After Budapest, real estate is now also significantly overvalued in rural areas,” recalls Tünde Tancsics in response to the report by the National Bank of Hungary.

The future of housing in Hungary

The future of the Hungarian housing market will depend on interest rates, as central bank rate hikes could affect housing loans. If inflation continues, they could hit new highs, writes Origo.

We have already seen something similar in 2008”, continues the expert. “When interest rate hikes were accompanied by very weak demand in the housing market. Uncertainty about the dire economic outlook is also adversely affecting buying trends. Buyers and builders are becoming more cautious as inflation erodes real wage growth. The cost of building materials has increased. The disruption of supply chains post-pandemic is now more than ever. »


Laura T. Thrasher