Huge upheaval brewing in the Hungarian property market

The madness in the rental housing market is about to begin soon, as students searching for apartments flood Budapest. But what can one expect? Well, according to experts, not much good, as an increasing number of people are shifting towards the rental market.

The rising interest rates, inflation and fluctuations in the euro exchange rate pushed many towards the rental market instead of purchasing properties. The interest has not diminished since then, explained Károly Benedikt, the PR and analysis manager of Duna House. He added that the demand for rental apartments is growing continuously, while the supply remains relatively limited in comparison, writes Pénzcentrum.

High demand, low supply

“Although the increase in housing prices came to a halt and the demand significantly declined by the end of 2022, it is not typical seeing property owners selling the properties they previously purchased as investments. Investors are typically not looking to sell now; instead, an increasing number of people are turning their savings into real estate investments.”

-said Benedikt about the prospects of property ownership.

There haven’t been any changes in the offerings of Otthon Centrum (OC) in recent times. The current supply remains the same both nationwide and in the capital as it was a year ago. The clear increase in prices indicates a growth in demand, while the supply has not been able to expand. This explains the higher competition for rental apartments.

Student expectations

The high school graduation exams are already underway, and soon the admission scores will be revealed. This will set the Hungarian rental housing market in motion, as it always signifies a significant surge in demand.

OC also highlighted that besides students, there is demand from working individuals (new graduates, those relocating to the city for work) in major university centres, particularly in Budapest. This additional demand, which appears cyclically, can lead to price increases. This will be particularly interesting in cities where significant investments are currently taking place, attracting a substantial number of new workforce.

Possible price reduction

As for when these extremely high rental prices will start decreasing, experts are pessimistic.

“If, in the next 1.5-2 years, the ongoing decrease in housing prices leads to a moderation in the overvaluation of residential properties and we recover from economic difficulties, homeownership may become more accessible to many, resulting in fewer people being forced into renting. This could logically provide a basis for the slowdown or cessation of rental fee increases.”

-reported Ingatlanpont.

Károly Benedikt underlined that the current level of demand always influences the price levels of rental properties. In the current rental market, the demand remains very strong. This is expected to continue driving further growth and strengthening the rental market until there is a decrease in loan repayments and interest rates.

According to OC, significant price decreases in the rental market have only been caused by external shocks in the past decade (such as the pandemic). In the short term, there is no indication of substantial decreases in sight.

Source: Pénzcentrum