Double-digit increase can be expected in Hungary’s house prices

House prices in Hungary increased on average by 15.4 percent last year, and territorial differences might be behind this, states Portfolio.hu. Prices in Budapest have increased by 22.5 percent in a year, which greatly exceeds the increase in the countryside. Hungary’s housing market cycle has stepped into a more mature stage during 2016, as the increased needs ignited resolute take-off on the field of supply, as MNB’s most recent housing market report states.

The increase is continuing

The price increase experienced recently might slow down, so we cannot state that the market is exalted concerning the extension of new housing loans or the increase of national average house prices. Despite the decrease, the price increase might keep on being double-digit.

The low interest rate environment has a beneficial effect on investment demands because of the favorable loan costs. The increase of the house prices exceeded the rise of building costs, which has a positive effect on improvements. The wider supply is the reaction to the increased demand for new houses. The majority of the registered housing projects will be completed in 2018, so we might still expect a market of demands this year.

The difference in prices between the capital and the countryside is high in whole Europe, but in the case of Hungary, this rate is significantly high, so the increase in Budapest greatly exceeded the increase in the countryside. While prices have risen in Budapest by 22.5% last year, rural cities produced a 13.4%, settlements produced a 9.3% increase. The increase was also high in real terms, it reached a 13.4 percent national average, which is close to the nominal rise of 15.4 percent.

Increasing loans

During 2016 the loan processes further supported the take-off in housing market demands. The appearance of new housing loans increased by 42 percent in a year, while half of the house purchases have a loan attached to them. The favorable loan interests are countered by the increasing house prices. It especially true for Budapest, where the index of house purchases’ availability – which means the opportunities of two households with average income to purchase a 65-square meter house from a 70 percent loan – is constantly increasing, and it has already reached the healthy limit in Budapest. However, house prices are still under the level that is justified by the macroeconomic fundamentals, so we still cannot talk about an exalted market.

A stable estate market: Balaton

Along with the housing market of Budapest, the estate market of Balaton’s resort area is also significant either because of its size and its touristic aspects. The house prices show lower variability in the Balaton area compared to the national average. They lost less from their value during the crisis, but the increase is not higher here than the national average. In the case of the estates in Balaton, mostly the resort area was where the prices increased in a higher rate than in the other parts of the country.

Photo: Budapest Image

Ce: bm

Source: Portfolio.hu