Hungary’s Housing Market Is Sizzling but Strained

In a market where real estate prices were already climbing faster than anywhere else in the European Union, Hungary’s residential property boom accelerated even more in recent months and that has raised serious red flags for the country’s central bank.

According to preliminary data from the central bank, home prices in Budapest surged by 30% year-over-year in the third quarter, while nationally they rose 24%. This acceleration comes on top of already strong growth and suggests a housing market that is not just growing but overheating.

Much of this pressure can be traced back to a controversial government subsidy program introduced by Prime Minister Viktor Orbán just ahead of next spring’s election. Starting in September, first-time buyers were given access to 25-year mortgages at a fixed 3% interest rate, but only on certain properties: apartments up to 100 million forints (roughly €270,000) and houses up to 150 million forints, with a cap of 1.5 million forints per square meter.

The central bank warns that this is fueling demand in an already supply-constrained market. In fact, its “over‑valuation index” now has four out of five indicators flashing red. Even before the program kicked in, the bank said that “demand had surpassed levels that are sustainable in the longer term.”

Signs of strain
One worrying note: despite the boom in demand, supply remains tight. The central bank report reveals that in the third quarter, transactions surged, but so did “ad‑hoc” maintenance and speculative buying. In Budapest, the share of property sales under 1 million forints per square meter dropped sharply — from around 50% to just 40% — while homes in the 1 – 1.5 million forint range now make up nearly half of all transactions.

Yet even as prices soar, there may be glimmers of cooling: new developments rose 47% year-on-year in terms of construction and sales in Q3, but many sellers are already reacting. Nearly a quarter of new homes had their asking price reduced, and in over 56% of price-change cases, the adjustment was downward.

Perhaps most alarming is the central bank’s assessment that home prices now exceed economic “fundamentals” by 14.3% nationally, driven by rising transaction volumes, cheap mortgage credit, and a surge in speculative buying.

Though most mortgage loans in Hungary carry low loan-to-value ratios — a mitigating factor for systemic risk — the bank warns that the current trajectory may undermine affordability and long-term financial stability.

Hungary’s housing boom is not happening in isolation. Across the EU, real estate is on the rise, but few countries are seeing growth as steep. In Q1 2025, prices in the EU increased by 1.4% quarter-on-quarter on average, while Hungary’s index (based on 2015 = 100) stood at a staggering 339% — more than double the EU’s typical pace.

A recent Euronews analysis found that between 2015 and 2024, house prices grew by 53% on average in the EU, with significant divergences between countries. In absolute terms, Hungary is among the fastest: between 2010 and 2024, its real estate prices rose by more than 230%, outpacing even its Central European neighbors like Czechia or Poland.

Yet the cost of buying in Hungary still remains “relatively affordable” in a regional context. According to real estate market observers, apartments in Budapest typically go for around €3,000–3,700/m², compared to €4,600–5,600/m² in Prague and €4,300/m² in Warsaw.

Hungary’s real estate frenzy poses a paradox: strong momentum, but rising systemic risk. The central bank is already sounding warnings; the government is pushing forward with politically motivated housing incentives; and buyers continue to flood into a market where supply is lagging. If the current trajectory continues, that “soft landing” many hoped for may become much harder to engineer.

For now, Hungary remains one of Europe’s hottest housing stories — but beneath the surface lies a ticking risk that could reshape its financial landscape.