The Hungarian forint has reached a historic low in recent days. But how will this affect the Hungarian real estate market, and who will have a huge advantage in the current market conditions?
The depreciation of forint is still ongoing, having reached 400 historic lows on Monday. The sudden fall of the Hungarian currency is due to the economic sanctions imposed on Russia as a result of the Russian-Ukrainian war and the threat of gas cuts. Hopefully, the current economic situation will not take too long, however, there could still be some great winners in the Hungarian real estate market.
Since 2012, property prices have been rising steadily across the country, and in the last 2-3 years prices have started to rise sharply in the market. The Hungarian market is chiefly dominated by retail transactions and domestic players who receive their salaries and take out home loans in Hungarian forint. However, the current depreciation of the forint could give foreign investors a significant financial advantage.
This is particularly true for those coming from the eurozone as well as Switzerland, the UK, China and the US.
Numerically, Hungarian forint has weakened by 11-15% against the major currencies since the end of February. This means that from the perspective of foreign buyers, house prices have also fallen sharply by 11-15%.
As the Hungarian news portal Portfolio reports, this could lead to a significant increase in demand, especially from Austria, Slovakia and Romania. If investors do not consider the current situation too risky, they could push up prices in the agglomeration areas of the big cities close to the border, as well as in Budapest. The Hungarian capital is the main point of interest for Chinese investors, while Austrian and German buyers are mainly interested in the countryside.
According to an expert, real estate is the best investment at the moment, even if prices in the prime areas can rise by another 100-200,000 HUF per m2 in the upcoming months – reported by 24.hu.
Even more intensive changes can be expected in the commercial property market, concerning offices, logistics, retails and hotels where companies invoice their transactions mostly in euros. In this segment of the real estate market, developers borrow their project loans mainly in euros (due to lower interest rates), while owners and investors pay their rents in euros. Based on all this,
the cost of renting a 1,000 m2 premium office has jumped from HUF 7.1 million to HUF 8 million in the last two weeks.
For tenants, this is a sudden and significant increase in costs, who are also struggling with increasing energy prices (companies do not benefit from rent reductions).
Additionally, the increase in construction costs will affect both the residential and commercial property markets. After last year’s drastic increase, further growth can be expected this year as well, but this time for different reasons. Most of the building materials are imported, so prices have risen sharply as the forint exchange rate has deteriorated. This impacts all sub-markets, including new housing and rents.
Read alsoCentral bank may intervene: a record weak forint poses a serious threat to the Hungarian economy
Source: portfolio.hu, 24.hu
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