Housing crisis: Home-ownership virtually impossible in Budapest

The real estate boom in Hungary has been growing in recent years, which is why prices in the millions of square metres are not uncommon in the capital. Based on Q1 2022 data, Budapest continues to have the highest house prices in Hungary. The average price per square meter of real estate in the capital now stands at HUF 810,000 (EUR 2,181).

However, the price gap between rural cities and Budapest has been narrowing. Cities like Veszprém and Debrecen are witnessing significant increases in property prices. Nevertheless, the expectation is that the price gap between the capital and other parts of the country will persist in the coming years, writes Pénzcentrum.

Local differences

District V remains the most expensive district in Budapest, with an average price per square meter of HUF 1.16 million (EUR 3,120.93). Other expensive districts include I, II, and XII, where the average price per square meter exceeds HUF 1 million (EUR 2,690.45).

On the other hand, the cheapest district is XXI, with an average price per square meter of approximately HUF 598,000 (EUR 1,610). This price disparity between the most and least expensive districts amounts to a factor of 2.3.

Considering the average net income in Budapest, which currently stands at HUF 422,000 (EUR 1,136), it is interesting to examine how long it would take to purchase a property in different districts of Budapest. Assuming one can save 100 percent of their earnings and buy a property at the average price per square meter, the results indicate that owning a property outright is virtually impossible.

In districts such as V and I, it would require 19 and 18 years of salary, respectively, to afford an 82-square-meter property. In districts II, XII, and XI, the required savings period is 17, 17, and 16 years, respectively. The cheapest district, XXI, necessitates 10 years of savings, while districts XXIII and XX require approximately 10 years each.

Role of the state

The Housing Affordability Index (HAI) measures the number of times the income of a household with two average incomes is required to purchase an average home with a loan. If the HAI is above 1, the family can purchase a home on credit without financial strain.

However, recent years have seen a decline in home affordability for Hungarians. By 2023, only families with three children would be able to afford a new home in Budapest without excessive financial burden. The abolition of the urban CSOK (Family Home Creation Support) programme has further exacerbated the situation, making it practically unaffordable for childless couples to buy a home on credit.

What’s to come?

The discontinuation of the CSOK programme, coupled with the rising housing prices, is likely to reduce housing demand. However, Budapest may be less affected due to its already high property prices.

Families with two children may still be able to afford second-hand properties with loans, although the affordability threshold is becoming increasingly challenging to meet. Without state support, the prospect of purchasing a new home is financially out of reach for most families.

Home ownership is becoming a luxury that is primarily accessible to the affluent or families with multiple children. The challenges of purchasing a property without a loan and the diminishing role of state support have made it exceedingly difficult for the average Hungarian to fulfil the dream of owning a home in the capital.

Source: Pénzcentrum