Holiday Homes and Investment Property on the Market

According to estimates by the Duna House property agency, the number of sales transactions on the Hungarian residential property market recoiled and returned to early 2021 levels in the second month of the summer.

The 11,185 transactions forecast by the property agency exactly equals the January 2021 and early summer 2020 figures, when the market started to gain momentum after the lockdowns of the Coronavirus pandemic. That said, the forecast is about 12-15% lower than the July turnovers of the previous years, the company reports.

Experts say the main reasons of the decline are the liberation from the long months of restrictions introduced on account of Covid-19 and the stronger than usual holiday boom. However, all this will cause only a temporary reduction of the speed of sales transactions: according to Duna House both sellers and buyers can expect that property market activity in the autumn will be just as brisk as it was in spring 2021. Although the Demand Index is currently at 75, which is the lowest July value of the past few years, it still indicates a property market demand that is similar to 2019, the last pre-Covid year.

Contrary to the recoil experienced on the property market, the housing loan market is still breaking records each month. According to factual figures published by MNB, the National Bank of Hungary, mortgage contracts worth in excess of HUF 364 billion were concluded between April and June. Duna House Finances staff expect this to be HUF 115-130 billion in July which will be close to HUF 136 billion, the amount actually borrowed by Hungarian clients in June. The domestic residential mortgage market has some huge expansion potential currently, which forms the basis of the plans and aspirations of MNB. On GDP terms, the pool of residential mortgage taken out by residents of Hungary lags far behind that of the EU and even the other V4 countries (the Czech Republic, Poland and Slovakia). Apart from the brisk demand triggered by the first home subsidies (which caused a 10-15% growth compared to the previous year) the residential mortgage market will further be supported by the property market boom expected for the autumn.

In July, property market activity shifted to the region of Western Hungary where average sq. m. prices grew by 18-20%. One of the key contributors to this trend was the sudden increase of demand for holiday homes by Lake Balaton and Lake Velencei which are – as a result of changes in owners’ habits and also of the pandemic – used by their new owners not only seasonally but also on a permanent basis today. Even though the sky is the limit for prices in the holiday resorts, this spike is mitigated by property prices in country towns, so the overall picture for the entire Hungarian market is similar to that seen in 2020. 38% of properties changed owners at prices below HUF 250,000 per sq. m. while one in every four buyers bought a new residential property at prices ranging between HUF 15-20 million in the country. In Budapest and its outskirts, on the other hand, the average price paid for residential properties is between HUF 40-50 million. While in the capital 55% of homes sold had a sq.m. price between HUF 500,000 and 800,000, in County Pest less than one-third of all properties were sold at such prices. It is still safe to say that the property market in the outskirts of Budapest is rather balanced, there are no extreme values in any of the categories.

From a buyer’s perspective acquiring the first home, investment and moving into a larger home are the three main motivations to buy, while a sharply increasing number of sellers are selling properties originally bought as an investment. This meant that in July 28% and 24% of former investors intended to cash in on the increase of prices in Budapest and in the country, while these figures for the same period last year were 10% and 9%, respectively.