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Coronavirus Cuts Hungarian Housing Market in Half

Ábrahám Vass 2020.05.11.

As a consequence of the coronavirus outbreak, the housing market greatly shrunk in April in comparison to the same month one year ago, and while rental fees also went downhill, property prices have modestly decreased thus far. Experts point out that buyers’ positions have improved and will probably continue to do so.

Well ahead of the coronavirus outbreak, experts already predicted that change may come to Hungary’s housing market, as prices over the past five years sky-rocketed both in terms of sales and renting. A drop in the number of transactions that began in the second half of 2019 might have already indicated this.

And not only that: an analysis of property database Ingatlan.com and the Central Statistical Office (KSH), recently showed that in the fourth quarter of last year, price increases already stopped, and even slight decreases could be observed in Budapest; while the price of homes fell by 3% on average, those newly-built dropped by 1.7%.

Fact

As of 2019, the GDP-proportionate weight of property transactions in Hungary's economy amounts to 6.55% (while together with the construction industry this rate is 11.93%).

Duna House: Housing market to shrink by 58% in April

Hungary’s housing market shrank by 58% in April compared with the same month a year earlier, on the back of a lockdown and economic uncertainty due to the novel coronavirus epidemic, real estate agency Duna House reported. Property sales came to 5,971 in April compared to 14,166 last year, according to Duna House.

Although it hit only in mid-March, shrinking can be detected in the first third of the year as well. From January-April, the sales of flats and houses in Hungary came to 40,105, down 24% from the same period in 2019.

In a weekly breakdown, the market reached its low point in the first two weeks of April, when sales were down 67%, the agency reported, adding however, that demand has since started to pick back up, but actual sales were only expected to rise, if the epidemic remains under control.

Property prices

This tendency, however, is yet to result in a major decrease in prices at the moment. In comparison to end-of-February data, a modest decrease could indeed be observed, but it’s not something typical in the market as a whole, 24.hu wrote, in reference to real estate database Otthontérkép after observing data until mid-April.

While Budapest saw an average decrease of 5.7%, the decline was more apparent in the countryside where it amounted to 14.1% during this period. In Budapest (examining the case of properties “at least” in good condition), this means a drop from HUF 841,000 (EUR 2,402) per sqm to HUF 793,000 (EUR 2,265), while outside the capital, a drop from HUF 440,000 (EUR 1,257) per sqm to HUF 378,000 (EUR 1,080). The analysis, however, notes that this decline can still pretty much be considered as the continuation (and, of course, the intensification) of a trend that had started months ago before the outbreak.

The real estate site’s sales director also warned that “while signs [of decline] in offer prices can already be detected, panic-like reactions suggested by certain media outlets, sharp fall in prices, and similar movements are still out of the question.”

Rental fees to decrease

After the initial shock, the rental market is beginning to revive- rental fees, however, have decreased considerably in Budapest, Index reported in reference to Rentingo.com’s data.

On average, renters are now to pay approximately HUF 21,000 forints (EUR 60) less than in January, meaning that the rental fee of an apartment in the capital now costs HUF 148,000 (EUR 422) on average, while this peaked at HUF 169,000 (EUR 482) in January. In addition, bargaining has also become a common practice.

Increase of Housing Prices Higher Than Net Wage Hike

In this matter, the extent of decline is expected to stabilize; it wouldn’t, however, come to a halt, due to the large number of Airbnb apartments coming back on the rental market, resulting in the increase of supply. Interestingly, while around 2014, the apartments in the central districts of Budapest, due to the investment (caused partly by the touristic boom) played an important role in the large extent of price increases. Now, these are the districts that drive the declines as a result of the lack of tourism and need for short-term accommodation.

In addition, the amount tenants would be willing to pay is also appearing to decline.

Construction permits to go downhill

That the coronavirus will probably be felt for quite some time, a recently published KSH analysis also seems to confirm. According to Statistical Office’s latest findings, the number of construction permits issued went downhill in the first quarter of the year. In total, 34% fewer permits have been granted in comparison to the same period of 2019.

In addition, based on the same analysis, Magyar Narancs warns about the big extent the number of permits actually used dropped in comparison to the Q4 of 2019 (drops are normal in this matter and time frame, only the extent is huge, in their view). Given that in Q1 2020, 30% more flats have been built in comparison to the same period of 2019, the liberal weekly speculates that due to the increase in supply and an apparent decrease in demand, price decreases (of the newly-built homes) may be soon to come.

featured image via Zsolt Czeglédi/MTI