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Rent prices skyrocket in Hungary: how long will the rise last?

Housing market Rent prices Budapest downtown

Rents continued to rise in May in Hungary, according to the latest data from the KSH-ingatlan.com rent index. Nationally, the rise was 1.8 percent. Meanwhile, in Budapest, rent prices increased by 0.6 percent in just one month. On an annual basis, average rent prices went up by 15.6 and 16.5 percent respectively, according to the latest data.

Prices are still rising

In 2023, rent rises have gained momentum. However, the rate of increase is below the rate of inflation. Taking inflation into account, May rents are 11 percent below the national real rent index’s record high in August 2019, Portfolio reports.

The rental market has also seen an increase in supply, which can be seen as a prelude to the summer season, Portfolio explains. In mid-June, tenants in Budapest and nationwide had 14-18 percent more apartments for rent to choose from. The national rental supply consists of more than 11,800 apartments and houses for rent. According to an expert from ingatlan.com, if the supply growth persists, it could put a brake on rent increases.

Rent prices in Budapest

According to ingatlan.com, the average rent for apartments advertised by owners in Budapest in mid-June was HUF 230,000 (EUR 615,49). The highest rents were in Districts 2 and 5. There, apartments were offered for HUF 350-350,000 (EUR 936,84).

The average rent was HUF 225,000 (EUR 602,09) in District 11 and HUF 240,000 (EUR 642,36) in District 13, which are the most popular and the neighbourhoods with the highest supply. Meanwhile, the cheapest districts include Districts 17, 21 and 23, where apartments were offered to tenants for HUF 150-155,000 (EUR 401,47-414,88).

Rent prices across the country

The average rent in the county seats is HUF 130,000 (EUR 347,97). However, there are significant differences. Veszprém is the most expensive city with a rent of HUF 167,000 (EUR 447). It is followed by Székesfehérvár, Debrecen and Tatabánya with HUF 160-165,000 (EUR 428,24-441,81). Salgótarján and Békéscsaba remain among the cheapest cities, with rents of HUF 90-90,000 (EUR 240,84).

Featured image: illustration

Average Budapest apartment price rose by 50 percent

Hungary real estate market Budapest

The psychological price of apartments has increased from HUF 20 to 30 million (EUR 53,657.94-80,486.90) in a little over two and a half years. Otthon Centrum (OC) has examined what kind of apartment are available for purchase for this amount of money in the capital city.

The apartments offered at the HUF 30 million threshold are popular among young couples and people taking their first steps into home ownership. Due to the dramatic increased in square meter prices in recent years, there is a noticeable demand for properties of this value. According to data from OC, in autumn 2020, the psychological threshold used to be around HUF 20 million. Currently, it is drawing close to 30 million, writes Index.

End of price hike?

According to the latest market data, the pace of price increase has lost momentum. This can be primarily attributed to rising interest rates, the inflationary environment and a decrease in purchasing power. As a result, many potential buyers are waiting, hoping for significant price reductions. There is indeed a noticeable drop in prices for family houses. However, in the case of apartments, it is only the rate of increase that is slowing.

The high inflation and deteriorating interest rates had the least impact on the prices of used brick apartments. The current price per square meter of HUF 1,017,000 (EUR 2,728.63) is 5 percent higher than the prices in the fourth quarter of 2022.

In contrast, the rise in price per square meter for panel apartments has essentially halted in the capital city. The current average value is HUF 747,000 (EUR 2,004.22), which is only 0.6 percent higher than in the previous quarter.

Only the average price per square meter for family houses has plummeted in the capital city, however by a significant rate. The average value of HUF 603,000 (EUR 1,617.86) is 18 percent lower than the average cost per square meter in the fourth quarter of last year. This represents a massive price advantage of several million forints for buyers in this segment.

What’s available out there?

It is important to note that there are striking price differences between districts. We can observe prominent differences in terms of apartment size available for thirty million forints.

With this budget in the 3rd district, one could find a 40 square meter apartment, while in the 11th district, it would be limited to 35 square meters. The same trend persists on the Pest side, where in the popular 13th district, this sum would be sufficient for a 35 square meter apartment, while in the 14th district, it would accommodate a 37 square meter apartment. In the outer suburbs of Pest, however, at least a 40 square meter, one and a half-room apartment can be purchased, and in Csepel, a 56 square meter, two and a half-room apartment can be obtained for 30 million forints.

It is virtually impossible to find a family house available for 30 million forints. Considering the average price per square meter, one could potentially purchase a 50 square meter house with this budget. However, there is a scarcity of such small family houses in the market.

If there is any available, in the 3rd district it would only be sufficient for a mere 35 square meter house, and in the outer 16th district, it would accommodate a 45 square meter house, based on the average price per square meter in those districts. However, with a bit of luck and persistent searching, it is not impossible to find a 55 square meter, two-bedroom house for this price in the 20th and 23rd districts.

Rental market: This is the most expensive Budapest district

budapest property market airbnb rental real estate

According to KSH-ingatlan.com’s rent index, rents rose by 0.7 percent in April nationwide and by 1.7 percent in the capital. Meanwhile, rents increased by 17 percent in Hungary and 19 percent in Budapest over the year, the real estate market portal said. So far, the most expensive district in the Hungarian capital has been District 5. However, this has changed, and another district has taken the lead. We will also show you the cheapest districts in Budapest.

People would rather rent than buy

László Balogh, chief economic expert at ingatlan.com, said that so far this year, compared to last year, interest in apartments for sale has fallen by 44 percent. At the same time, the number of apartments for rent has decreased by 22 percent. The number of searches for residential properties for sale fell by 18 percent, while the number of searches for rentals increased by 11 percent, napi.hu reports.

Significant rise in rents over the past year

Supply data for mid-May also point to a buoyant rental market. According to ingatlan.com, the average rent in Budapest was HUF 225,000 (EUR 600), compared to HUF 220,000 (EUR 587.64) a month earlier and HUF 180,000 (EUR 480.79) a year earlier.

The most expensive and the cheapest Budapest districts

In the districts of Budapest, apartments were advertised for rent for an average of HUF 245,000 (EUR 654.35) in District 13, HUF 230,000 (EUR 614.29) in District 11 and HUF 330,000 (EUR 881.37) in District 2. The latter district took over the title of the most expensive district from District V, where the average rent was HUF 324,000 (EUR 865.45) in mid-May. The cheapest districts of Budapest are District 17, 19 and 23. In these places, apartments were offered for rent for an average of HUF 138-147,000 (EUR 368.62-392.66).

Rental market in the county seats

Veszprém tops the list of the most expensive county seats with HUF 165,000 (EUR 440.74), followed by Szombathely with HUF 155,000 (EUR 414), then Debrecen, Székesfehérvár, Győr and Tatabánya with HUF 150,000 (EUR 400.67) each. Among the county seats, Szekszárd, Kaposvár, Miskolc, Békéscsaba and Salgótarján are the cheapest. The average rents in these cities range between HUF 90,000 (EUR 240.41) and HUF 110,000 (EUR 293.84) in mid-May, the statement said.

Huge upheaval brewing in the Hungarian property market

Budapest real estate housing crisis in Budapest's real estate 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.