What’s next?! 35% increase in the Budapest rental market

In Budapest, rents have risen by 35% in a year, while in some rural cities they have increased by almost 30%. This remarkable increase is higher than the 21-year record high inflation in Hungary.

Budapest rents hit a record high in May. Compared to the beginning of the year, prices in Budapest rose by 2.9%, and nationally by 2.3%, representing annual increases of 18.2% and 19% respectively – reported the Hungarian news portal Femina.

However, the rental price increase is even more dramatic compared to the same period last year. Within a year, the average rent increased by 35% in Budapest, while in most of the capital cities the increase was also in double digits, 10-30% on average.

In the Hungarian capital, the average monthly rent is currently between EUR 434-460 (~HUF 165,000-175,000).

In Veszprém, Győr, Székesfehérvár and Tatabánya, the average monthly rent is EUR 342-395 (~HUF 130-150,000), while in Szeged, Pécs and Debrecen it is EUR 303-316 (~HUF 115,000-120,000).

Rental prices in the Hungarian capital vary from district to district. The most expensive area is the 5th district, where tenants have to pay on average EUR 658 (~HUF 250,000), followed by the 1st, 2nd and 13th districts with an average price of EUR 526 (~HUF 200,000). The cheapest is the 21st district, where housing costs on average EUR 329 (~HUF 125,000) per month.

The significant increase in rental prices exceeds the 21-year record high inflation in Hungary.

One of the reasons for the remarkable price increase in the rental market is the large drop in supply. In March and April, the number of people looking for rentals was very high in Hungary. Nationally, the demand in the market increased by 14% compared to March 2019. This is partly due to the fact that many Ukrainian refugees wanted to settle in Hungary, as well as the rise in interest rates on housing loans. These tenants acted on time getting their hands on the cheapest offers. Last year at this time, there were almost 20,000 apartments for rent, while this year there are approximately 10,000 to choose from in May – reported by the Hungarian news portal hvg.

Experts cannot say how long the price rises will last, but it is certain that the number of people looking for housing will increase again after the higher education entrance exams, which could lead to further rises.

It is also important to highlight that the rise in interest rates also has an impact on the rental market. Fewer people will buy a property with a mortgage, which could slow the rate of house price appreciation but it could also discourage investment buyers. In spring 2015, the yield on residential property in Budapest was 8.77%, while in other capital cities it was over 9%. The gross yield on a rental property is currently 4.75% in Budapest and 5.22% on average in other capital cities.

Source: femina.hu, hvg.hu