Property prices and rents may fall in Hungary due to expensive gas and energy

Budapest real estate

The Hungarian government’s new utility price regulations may decrease real estate prices in downtown Budapest and other big cities. As we reported before, the government commissioner said last week that private individuals in Hungary would be charged below the actual market prices for their gas and electricity consumption even if it exceeded the average level under which a price cap was applied. However, that new price will still be multiple times the old one. That might have a considerable effect on the Hungarian real estate market.

Not everybody will be able to buy gas and electricity at the capped prices

According to telex.hu, the international energy crisis and the government’s latest decisions regarding the utility price caps in Hungary will have a considerable effect on the energy consumption of households and real estate prices. The changes will probably affect the offices, hotels, and surgeries operating in apartment blocks.

If such buildings have only one gas meter, their condominium managers must report the number of apartments and spaces occupied by businesses by 15 August to receive the utility price cap. That is important because there are a lot of offices, surgeries, Airbnb hotels and firms downtown. Provided they do not receive the electricity and gas at the capped price next year, real estate prices will largely chance in the big cities.

László Balogh, an expert from the Hungarian real estate searching website, ingatlan.com, said it would likely raise questions at the owners’ general meeting when discussing which apartments get and which do not get the reduced price. If the authorities find out that a consumer received the gas or electricity improperly, they might pay 1.5 times the market price as a fine.

The price of downtown apartments might fall significantly

Despite the uncertainties, there were positive scenarios for 2023, Mr Balogh said. It could mean a strategic difference in maintaining the SME sector’s competitiveness if they continued to get the gas and electricity at the capped price. Airbnb hotels operating in condominiums will get a considerable market advantage compared to traditional hotels. Hotels already pay the market price for energy and heating.

However, if the SME sector does not get the reduction, the value of offices, Airbnb hotels and surgeries operating in condominiums will fall. That is because the operating costs will rise significantly.

The process could be helpful for potential buyers since it may decrease the price of downtown apartments. Furthermore, investors might choose to rent out their apartments for a longer term, resulting in rental price decreases.

Szilárd Németh, the government commissioner in charge of the government’s utility price cap scheme, announced the new utility price cap rules last weekend:

  • the price cap will be applied for up to 1,729 cubic metres of gas used per year (144m3/month) and for 2,523-kilowatt hours of electricity used per year (210kWh/month) by a household.
  • Households will pay HUF 102 (EUR 0.25) for a cubic meter of gas for their consumption below the limit, and HUF 747 (EUR 1.88) for each cubic metre in excess, while the market price is HUF 1,020 (EUR 2.56)
  • One kilowatt hour of electricity will cost HUF 36 (EUR 0.09) below the limit and HUF 70.1 (EUR 0.18) above, while the market price is HUF 268.9 (EUR 0.68)
  • Separately metered water heaters operated at night will be charged HUF 23.1 (EUR 0.058) a kilowatt hour below the limit and HUF 62.9 (EUR 0.16) above.

These numbers mean that the price of electricity will double, while the gas price will increase sevenfold above the average consumption.

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