Real Estate Market: Weakest Year Start in Ten Years

The Hungarian real estate market plunged to a new low in January 2023, after stagnating in November and December. The 5,853 sales estimated by Duna House nationwide represented the weakest start to the year in 10 years: the last time there were fewer transactions in January was back in 2013, the property agency Duna House reports.

Compared to the same period last year, members of the Duna House team saw a drop of 46% in market activity. In the current market environment, sellers may need to adapt, reconsider and reduce their selling prices, and buyers may expect some improvement in their bargaining power. Overall, however, Duna House does not expect the market to strengthen in 2023, forecasting an annual sales volume in the range of 90,000-110,000 transactions for this year.

Similarly to the real estate market, the year started with declining volumes in the credit market, too, according to the domestic data of Credipass, the international financial brand of the Duna House Group. In the first month of the year, Credipass estimated that HUF 37 billion in mortgage loans were taken out, down 10% on the previous month and down 66% on January of the previous year, which had been particularly strong on the back of the Green Loans offered.

Even though the dramatic increase of prices stopped and sellers started to adapt, they have still not fully accepted the idiosyncrasies of the current market environment. They are increasingly, albeit marginally open to changing their asking prices: for brick and mortar homes in the country and in the capital this change translates to 6% and 5%, respectively, while in Downtown Budapest, one of the favorite regions of investors, it is even less, just a mere 2% in January 2023.

Sellers’ flexibility is more prevalent in the bargaining phase: in Eastern Hungary buyers’ bargaining margin rose to an exceptional 12%, while in the West and in Budapest owners are willing to reduce the asking price by 8% and 3-5%, respectively, based on January data.

The average time needed to sell a brick and mortar home was almost identical with that in the same period of 2022: finalizing a sales contract took four months on average for this category, while in the Western part of the country sales decelerated somewhat. Brick and mortar homes on both the Pest and Buda side of the Danube took the same time, approximately 3 months to find a new owner, but even Downtown sales transactions did not need more than 4 months to finalize.

Concrete block units with low running costs on account of the utility fees cap are enjoying a renaissance, and continue to find new owners quickly despite the market slowdown. In the country, it took less than two months on average to sell a prefabricated concrete block home in the East, and just over two months in the West. On average, flats in the housing estates in Pest sold in 55 days in January 2023, while their peers in Buda took 2.6 months.

The asking price changed by 3% in the Western part of the country, accompanied by a bargaining margin of 3%, while in the East, the asking price changed only minimally, with a 5% bargaining margin. The asking price of concrete block units in Budapest changed by 3-4%, while buyers’ bargaining margin widened to 3-6%.

Based on transactions completed in the first month of the year in Buda the average sq. m. price exceeded HUF 1.3 million for pre-owned brick and mortar homes. In Downtown Budapest residential properties cost north of HUF 1 million per sq. m. on average.

Buyers’ propensity to renovate was the highest in the Western part of the country: 19% of all homes sold were in need of an overhaul, while in the rest of the country their share was only 5-8%.

Based on January sales data collected by Duna House the top motivation of buyers in the capital and in the country was making an investment (42% and 38%, respectively), followed by the acquisition of the buyers’ first home.