Hungary – The reasons behind skyrocketing rental prices

During the last five years, apartment rental in Hungary has become two times more expensive than before, which causes severe housing and saving difficulties for several people. The problem is quite complicated – Airbnb can be considered as one of the reasons; however, investment in properties for rental purposes is another contributing factor.

It is becoming more and more challenging to get into the middle class or maintain this position due to current income and housing conditions – reported by Népszava.

The problem is so complex that soon no room will be available at a rental price that was required for a whole flat in the middle of the decade.

Accordingly, a few years ago, a bachelor flat at Gellért hill could be rented for 209 EUR (~70,000 HUF); today, this amount worths 10-20 square meters. Moreover, rental prices in the capital have increased so significantly that owners may ask 510 EUR (~171,000 HUF) for one room in a shared apartment. As a result, tenants are rebelling by posting sarcastic comments on Facebook advertising groups.

In many cases – besides prices – conditions also exclude the majority of tenants. Not only pets are not allowed, but only non-smoking university female students are accepted.

Problem 1 – The most profitable investment

As the Hungarian news portal Napi.hu reports, one of the most frequently mentioned problem is that people have no other saving possibility, only investing in properties and giving them for rent.

According to László Balogh – Senior Marketing Specialist of Ingatlan.com – those who entered the real estate market on time, could gain a 20%-30% return on investment as a result of price increases. Furthermore, not only property prices but rental fees also experienced remarkable growth. In the latter case, owners could realise an 8-9% profit.

Apartments for touristic purposes can be considered as pitfalls of the market – in 2010, Airbnb apartments were offered for an additional 20 EUR (~7,000 HUF) above average flat prices; six years later, the difference was much higher – 78 EUR (~26,000 HUF). The problem is this phenomenon has narrowed that supply-side; owners prefer to offer their flats to tourists.

Problem 2 – No opportunity for saving

According to Balogh, price increases and saving difficulties are experienced by the tenant side as well.

60% of the capital’s average salary (300,000 HUF) – is spent for housing purposes.

Consequently, tenants do not have the opportunity for saving; they get stuck in an expensive sublet and cannot move on to a bigger one, not to mention buying their own property.

Problem 3 – Market crash is in the air

According to an expert, Péter Győri – the housing market may collapse at any time, dependant upon external circumstances. 

By way of example, tourism might be discouraged by a deepening crisis, or wage moderation might be realised, by which yields will no longer be as promising as products on the securities market, resulting in a massive selling demand. 

According to the economist, there is no apartment shortage in Hungary, nationwide 500,000 – out of which 100,000 are in the capital – properties stand empty. ”There is no apartment shortage; the problem is affordability”; – assessed the expert, according to whom a new strategy should be developed to avoid the collapse of the Hungarian real estate market.

Source: napi.hu; nepszava.hu