The Hungarian real estate market will turn around in the coming months
For the first time in several years, the evolution of the real estate market in Hungary is uncertain. Experts say it could happen that rising interest rates on loans and rising overhead costs lead to a drop in the average house price per square meter nationwide.
Property prices have steadily increased in Hungary since 2015. The average price per square meter of a home in Hungary was EUR 2,014 in 2021. According to a recent Deloitte Property Index study, it takes 9 .6 years to save the entire gross annual average salary in Hungary to buy your own property – reported by Pénzcentrum.
The increase in previous years was fueled by several factors: increasing real wages due to a tight labor market, very cheap access to credit due to a low interest rate environment, yields up to at 8-9% on investment purchases, constant increase in inflation expectations, government subsidies (housing tax rebates, housing renovation programs, social security reimbursements, 13th month pensions, etc. .) were also a driver of the earlier housing market recovery.
However, the situation has changed over the past year. Real wage growth has slowed considerably due to rising inflation. The base rate is over 10%, which makes home loans much more expensive. The return on investment property purchases decreased by approximately half due to the increased expense. It is no longer inflation expectations that are high, but inflation itself. Some government subsidies are still in place, but the effects of one-time subsidies have already dissipated, and new difficulties have arisen due to high utility bills. Due to all these factors, the average price per square meter has stagnated for several types of properties – reported by Forbes.
According to analysts, the next six months will see a reversal of the status quo and a radical change in the real estate market. Although this does not necessarily mean lower prices in the real estate market, some experts believe it could even happen. Analysts point out that if average selling prices start to fall, this is due to factors that negatively affect the majority of the population, such as a drastic drop in solvent demand, i.e. a crisis. Thus, despite the fall in real estate prices, no surge in purchases is expected. Other experts say that despite deteriorating financial conditions, there is no evidence that average price growth has slowed. For some types of properties (generally apartments in downtown Budapest), prices per square meter have stagnated, but for several types they have even increased.
Inflation, which is now above 13% and is expected to accelerate further until the end of the year, is affecting the housing market on several fronts. On the one hand, disposable income has fallen sharply, and on the other hand, the rise in the floor rate has made credit rates much more expensive. On the investor side, inflation is also making itself felt, with real estate investment not being as profitable as it was a few years ago. But those days are over: an inflation-following government bond or a more stable dividend-paying stock now offers a better return than real estate.
Another important factor is the partial removal of the reduction in public services. Energy prices for households, which could increase several times, also disrupt supply, demand and prices. According to experts, sellers will only have to deal with maintenance costs in the coming months. Towards the end of the year or the beginning of next year, there will be more apartments on the market whose prices will already include the higher utility bills. It will also create a situation we haven’t seen in a long time: the seller will be forced to move. Many properties’ utilities will simply be unaffordable for homeowners. This market trend will drive down real estate prices.
The average price per square meter of properties with substandard energy equipment should start to fall by winter. The price of these apartments will be negotiable. On the other hand, more energy-efficient and more sustainable properties will be more in demand and prices are expected to increase further. Likewise, prices for panel apartments could continue to rise, as most Hungarian panels are heated by district heating, which has been exempted from the new utility rules. Therefore, their maintenance costs will not increase dramatically. According to experts, there will be a slowdown in construction and market purchases from autumn to winter. More activity is only expected from the beginning of next year on the real estate market.
Analysts say it’s not worth waiting for prices to start falling before buying. And not only because it is by no means certain that the property you are looking for will be cheaper. According to experts, the reasons for this are inflation and rising interest rates, which means that it will be slightly cheaper to buy a house if it is much more expensive to take out a loan for it.
Source: penzcentrum.hu, forbes.hu