How much higher can real estate prices increase?

As Forbes.hu reports, the upcoming tax raise can result in a huge increase in real estate prices, based on the trends observed in the middle of the year.

We have written about the state of the real estate market both in the first and second quarter of the year. Now, we are reporting about the increase based on the report of the Central Statistical Office, according to which the already existing real estate trend will result in even higher prices, as the data relevant to the second quarter of 2018 seems to confirm it. The Central Statistical Office’s survey examined the details of more than 200,000 real estate listings in the second quarter of the year. The price increase can mostly be attributed to a change in the taxation system, to which the real estate market responds with higher prices.

According to a recent survey, used properties are 18-24 pc more expensive than before, both in Budapest and in other large cities.

There has been a higher increase in the market of new real estates, which is mainly because the current tax-advantageous situation will cease to exist with the foreseeable tax raise at the end of 2019.

From 2020 on, the VAT applicable to newly built real estates will be significantly raised from 5 pc to 27 pc, resulting in a 20 pc increase in taxes.

Therefore, constructors and developers aim to finish all ongoing investments before the deadline. At the same time, buyers compete for the leftover projects, which is causing an increase.

Nevertheless, this is not the problem which adversely affects the market of used real estates. As we have reported, there are main differences between the real estate market of used and new properties. Two main reasons for the increase in this field are the overall trend of increasing prices in large cities and the housing loan constraints that will start to be applicable in October.

Due to the loan constraints, many buyers flooded the market looking for used housing which generated an extra demand on the market.

The price change has been significant in practically every part of the country: in the capital, houses and properties are 24 pc more expensive compared to last year, while in county-level cities prices have gone up by 18 pc. In other cities, there has been a 23 pc increase since last year, while smaller towns had a moderate 12 pc annual price rise.

Another possible root cause of the constantly increasing prices can be the fact that the number of foreign customers and investors is growing, which pushes up the prices. Also, other factors can enter the picture, such as opening factories in large countryside cities, like the case of the BMW factory, which can raise the prices by 40 pc.

Source: Forbes.hu