Brutal crash in Hungarian property market: unpredictable future

Prices rose again on the Hungarian property market in the first quarter of 2023, accompanied by a strong fall in sales, according to the latest housing market reports from the Hungarian Central Statistical Office and the central bank (MNB). According to an expert, autumn will be the earliest time to see whether this is just a slowdown in the downturn, or whether a recovery in sales could start to take hold this year.

Huge decline in demand

The first quarter of this year has not seen a halt to the decline in demand that started last year. According to the latest report of the Hungarian Central Statistical Office (KSH), the number of property sales was 31 percent lower than a year earlier, OTP Ingatlanpont said in a statement.

This decline affected the new and second-hand housing markets in similar proportions. At the same time, established prices have started to rise again after falling in the previous quarter. New builds accounted for the bulk of the 2.5 percent average increase (6%), but second-hand homes also saw nominal growth (1.9%). Thus, year-on-year, price increases of 13.6 and 9 percent were recorded in these two sub-markets respectively.

However, house price growth has still lagged behind the general rise in consumer prices for the third quarter running. As a result, real prices at the beginning of this year were only at the level of two years ago, OTP Ingatlanpont underscores.

Different situations in villages and towns

Today, the market shows a distinctly different face in villages than in towns. While in the latter, the decline in nominal prices slowed down at the beginning of this year, in the villages, the decline has continued for the third quarter. Therefore, in smaller settlements, the average home is now around 5.6 percent cheaper than it was a year earlier.

Even if the overall picture is mixed, the slowdown in price falls in the first quarter may also indicate that the market might be over the nadir of the downturn. However, according to David Valkó, it is still too early to say.

“While the summer is a quieter time for real estate, the conditions that could combine to determine a rebound are very much in flux.”

These include, first and foremost, the fall in inflation and the timing of when lending rates could fall to the 6-7 percent level that could start to drive demand growth.

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