Real Estate Market Adjusting to a Trend of Deceleration

The real estate market in Hungary in 2022 presents a changing picture: after a strong first and a slightly softer second quarter, the segment closed its weakest quarter ever this year, thanks to a subdued first autumn month, according to the latest Duna House barometer published on the website of the Budapest Stock Exchange this Tuesday.

Duna House price indices show that price increases have now stopped. Duna House estimates that there were 9200 property transactions nationwide in September, down 6% on the previous month, but the annual number of transactions already exceeded 100,000 in September.

The slowdown from the second quarter onwards is mainly due to the changing economic situation and the resulting increase in lending rates, Duna House experts say. Assuming a similar decline in the last quarter, the housing market could close the year with 120-130 thousand transactions in total. The changes due to the increase in real estate prices will create further uncertainty for sellers and buyers alike, which could also
have an impact on both prices and real estate market turnover in the last quarter of the year.

The change in Duna House price indices suggests that the housing market is now correcting the steep rise of previous quarters, with the national house price index stagnating in nominal terms and closing 7 points lower in real terms. The indices for individual property types and locations also show a downward corrective picture, suggesting that the upward trend seen so far may now be coming to an end. Demand has been low throughout the quarter, despite a small increase of the buyer activity index in the last month of the quarter. The change in the direction of prices is still minimal in the real estate market, with the room for manoeuvre currently not yet in the advertised price but in buyers’ bargaining margin, which in the third quarter ranged between 3-7% depending on location and property type.

Compared to the third quarter of last year, Credipass analysts saw a 30% decline in the mortgage market, which was even greater than the decline in the housing market, leaving the third quarter of this year as the weakest quarter.

The average loan size has declined across the country, and is no longer above HUF 20 million even in the capital. Based on the estimated volume of HUF 82 billion in mortgage loans disbursed in September 2022, the housing loan market closed the third quarter with a combined volume of HUF 264 billion. The majority of loan applicants opted for 20-year maturities and fixed rates for at least 10 years which is more predictable in a changing interest rate environment, but the number of contracts with a 30-year maturity also increased.

With fewer transactions, the real estate market saw an increasing investor presence in the third quarter. In the capital’s popular inner districts, interest in small apartments and 40-60 sqm. properties also suitable for renting increased, while Zugló (District 14), the former favourite, dropped to eleventh place in the popularity ranking. In 2021, property sales in Pest were mainly in the HUF 20-30 million range, but this year the focus has shifted to homes above HUF 70 million. On an annual basis, however, prices are still rising, with average prices per sqm. up by 29% in Buda and 30% in Pest for concrete block units compared to Q3 2021. For brick and mortar homes, the amount spent on a property rose to over HUF 90 million in Buda, while on the Pest side there was a 17% increase, based on sales data. In the country, average prices per square meter continued to rise for concrete block apartments, with the average price of a home in more than a fifth of transactions
in Eastern Hungary doubling compared to the same period last year. Compared to last year, the dominance of the HUF 50 million and above price category in County Pest got significantly stronger.

Turnover speed has accelerated, with concrete block apartments being the fastest to sell. In Western Hungary and Buda, it was more difficult to find new owners for pre-owned brick and mortar homes. Sales of new-build properties also decelerated, with the number of apartments advertised in the third quarter barely exceeding 20,000. The largest supply is to be found in Districts 13, 9 and 11. The average price per sqm. for new apartments in the capital is HUF 1.2 million, with the highest-priced district being the District 1 in Buda, where the average price per sqm. in new-build properties is close to HUF 3 million.