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Property market: downturn already at 60 per cent in Hungary
napi.hu, 17. August 2018 – Property investment transactions worth approximately EUR 320 million were closed in Hungary by the middle of the year, a 60 per cent reduction from the same period of the previous year. At the same time the favourable financing environment and sufficient liquidity may keep demand steady in the market of investment purpose properties. The annual investment value in 2018 may be close to previous year’s EUR 1.75 billion but closure of some high-value transactions may be delayed until 2019. Demand for retail outlets has grown significantly in the first half of 2018. The reduction of return on invested capital stopped in the first six months of 2018, the only exception being the premium retail sector. ROI in office and industrial/logistics properties is 6 and 7.7 per cent, respectively. ROI for retail outlets has sunk to 5.8 per cent. Analysts predict a slight reduction of returns. As far as sectoral distribution is concerned, a further increase of the share of retail outlets is expected and – on account of the Category ‘A’ office premises completed – the number of transactions in the office sector is also likely to increase.
Budapest residential property market may slow down
Napi.hu, 30 July 2018 – In the first half of 2018 there were 6517 apartments built in Hungary, 30 per cent more than in the same period of the previous year. The number of residential units under planning was 18,066, 8.9 per cent less than in the first half of 2017. The number of planning approvals issued in Budapest decreased by 27 per cent. 50-50 per cent of residential properties are still built by private persons and companies, respectively.
54 per cent of apartments created in a new building are located in houses, 36 per cent in condominiums and 6.2 per cent in gated residential communities.
The average floor space of apartments is 101 square metres, an increase of 5 square metres from the previous year. The number of apartments planned reduced by 27 and 3.5 per cent in Budapest and in county centres, respectively, and increased (by 17 per cent) in other towns and cities only.
Huge price increases around Lake Balaton
napi.hu 29. June 2018 – At present, holiday properties in County Veszprém are the most expensive, while County Zala shows the steepest price hikes and County Somogy boasts the most construction projects on the shores of Lake Balaton. Prices increases are exceptionally high in all three counties because new developments have been rearranging the market. Residential property prices around the lake have also been increasing continually. Back in spring 2015 average prices were approximately HUF 223,000 while in the second quarter of 2018 they were around HUF 335,000.
Property developers have been turning their attention to the region in the past few months. This is one of the reasons why County Veszprém and Somogy left County Zala behind: the latter has only started to draw developers recently. Prices in Somogy and Veszprém were more or less in synch up until the second quarter of 2016, but in County Veszprém there was a big bang in the second half of 2016, owing to new residential and other development projects. By 2018 the difference diminished because some large scale development projects had started in County Somogy, too (most notably in Siófok, Zamárdi, Balatonlelle, Fonyód and Balatonszemes).
Government super weapon apparently missed its target
napi.hu 4 July 2018 – The end of the preferential 5 per cent VAT rate will put an abrupt end to the housing boom and result in a brutal price increase of newly-built apartments. The almost 25 per cent price hike will have a serious effect on instalments paid for new apartments, new construction projects and on new developments after 2020, said to portfolio.hu based on a radio interview with Mihály Varga finance minister.
Varga reminded that the term of the Preferential VAT Act runs between 2016 and 2019 and that the government decided to forego significant tax income to further its demographic goals. However, 10 per cent of new apartments are bought by foreigners in Budapest, which means the benefit is exploited by real estate investors which is not what the government was aiming to achieve.
How long can the rally last?
napi.hu 15 January 2017 – Hungarian construction industry output is growing fast. According to market analysts, however, the number of restrictive factors is growing, too. A poor 2016 performance meant a very low base which supported a spectacular relative increase in 2017. Development projects financed by the EU and residential construction drive the industry forward. Growth is set to continue in the next few months: the volume of orders in November was 110 per cent higher than a year before. That said, a lack of workforce and the resulting increase of expenses pose significant problems for construction companies. Also, the future of the discounted VAT rate levied on residential projects is still not clear and if the reduced rate is cancelled the willingness to start new projects may decrease.
Changes in the legislation of apartment purchase duties
napi.hu, 12.12.2017 – From 1 January 2018 there will be changes in the method of calculation of duties payable on apartment purchases. When calculating the “reduced” duty base, i.e. the value upon which the duty is payable or when applying duty exemption, the market value of an apartment sold within three years of the purchase can be considered, as opposed to one year allowed earlier. “Reduced duty” means that the buyer can deduct from the duty base created by the purchase of an apartment the market value of an apartment sold by the same buyer, i.e. the duty base will be the difference between the market value of the sold and the purchased apartments. As far as the market value of an apartment sold after the purchase is concerned the rules remain unchanged: it can only be reduced if the sale occurred within one year of the purchase transaction.
How long will Hungarian apartment prices rise?
napi.hu, 08.11.2017 – There was a 2-point adjustment to the Budapest property index published by GKI Economic Research Ltd. compared to the previous figure from July. The national index remained unchanged. Property market outlooks peaked about a year ago but expectations are still high.
Although in the first ten months of 2017 the turnover of the apartment market did not grow on a year-on-year basis (in fact, there was a slight decrease), apartments at popular locations are still selling like hot potatoes and prices are still on the increase. An apartment with a good location is still considered to be a lucrative investment because at the age of low deposit interest rates it is hard to find a financial instrument that offers sensible returns paired with low risk.
As far as the Budapest agglomeration and Western Hungary are concerned the expectations of property agents for the next 12 months have deteriorated slightly compared to the previous quarter. In the Eastern part of the country, however, a slight improvement was detected.
This is not the time to buy a holiday home
napi.hu, 28.10.2017 – While there is no point in postponing apartment purchases because prices are climbing higher and higher, it makes sense to wait with buying a holiday home. According to a report published by a large online property agency this is because similarly to previous years prices are likely to start falling after the autumn rally. Let us take 2016 as an example: in the first and second quarters holiday homes sold at an average price of HUF 14 million compared to the average price of HUF 19 million at the end of summer 2015. The most expensive regions for buying a holiday home are almost exclusively in the proximity of Lake Balaton. The most expensive one is Siófok, where a holiday home will cost HUF 29 million, while a similar property in the region of Keszthely can be had for HUF 10 million less.
New apartments may flood the market
napi.hu, 04.11.2017 – A leading real estate expert said as a result of the 5 per cent preferential VAT rate that is expected to expire in 2019 the number of newly built apartments will become available on the market in the next couple of years will exceed even today’s figures.
There is an apartment construction boom in Hungary which, apart from the reduced VAT rate, is also due to CSOK, the Family Home Allowance. On a year-on-year basis the number of new apartments completed grew by 50 per cent in the first three quarters of 2017. The average price per square metre in Budapest, the Western and Eastern regions of Hungary is approximately 650-700k HUF, 360-400k HUF and 350-380k HUF, respectively. The differences are even greater for pre-owned apartments: these properties are three times more expensive in Budapest than in other parts of the country.
Fun facts on Hungarian residential properties
napi.hu, 06.06.2017 – According to a recent survey almost one third of occupied apartments in Hungary were built from brick and mortar, the percentage of apartments in concrete high-rises is 14 per cent while those built from adobe have a share of 13 per cent. In Budapest every fourth apartment is in a concrete high-rise. On a national level, one third of occupied apartments have three rooms while 31 and 29 per cent have two and four or more rooms, respectively. Average floor space has increased by 6 per cent since 2011 and is currently 84 sq. m. In Budapest the percentage of apartments with 40 or less sq. m. is 15 per cent, three times the national average.
In 2016 there were 2.49 people living each apartment. Occupant density is the lowest in Budapest with 2.15 people per apartment and the highest in small settlements (2.75 people per apartment). Last year more than 12 per cent of the 4.4 million apartments registered were vacant, and the tendency is rising. The number of unoccupied apartments grew as a result of the diminishing population, the aging population of small settlements, migration from villages and also the growing tendency of using apartments in towns as offices.
Strong start to the holiday home buying season at Lake Balaton
napi.hu, 25.05.2017. – According to a large property agency approximately 600 properties changed their owners around Lake Balaton in the first four months of the year. The majority of buyers are still Hungarians and prices in the most popular areas equal those in Budapest. In places with more difficult access from the capital – especially by public transport –, e.g. in Badacsonytördemic, Badacsonytomaj and Balatonberény, prices average at HUF 100-150,000. In Balatonfüred, on the other hand, apartments cost HUF 575,000 per square metre and those in Tihany fetch about HUF 700,000 while those directly at the lakeshore are even more expensive at HUF 1,000,000 per square metre. Along the Southern shore of the lake there is still a growing interest for holiday properties or even building plots situated closer to the lake. Properties farther from the water are, predictably, less sought after, especially if they are multi-story houses with 200 square metres or more, mainly from the “Zimmer Frei” period some twenty or more years ago.