How long will the property market craze last in Hungary? – Part one


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Real estate prices have risen by a brutal amount in 2015, up to 17%, but the price rise isn’t nearly as outstanding if we take into account the growth in previous years.

During the turn of the millennium, prices doubled in three years’ time, while in the early noughties, during the era of beneficial mortgages the cost of housing has also risen by 50% in 3 years. The current growth isn’t likely to stop this year, as several factors are helping the housing market to flourish further on. Given the salary rises of the past few years, there’s still a considerably ample space for the prices to elevate, including a possible several tens’ percent rise.

After many years of fall, 2014 saw a considerable rise in the prices of housing, even if it was a rather modest rise two years prior. The significant change happened in 2015, when prices started to increase at a much higher rate than before. Real estate has become 17% more expensive, including the last quarter when the increase rate was only below 1%. This means that by the end of 2015, real estate prices were approximately at the level effective in the second quarter of 2008, as if the years of the recession haven’t even happened.

It is important to note, however, that this is only applicable to nominal values, the situation is slightly different when it comes to real value. The radical decrease of real values has begun well before the recession, and while these have also become fairly consolidated, they’re still only at the levels of 2009. Compared to 2004-2005, they’re still 26% behind.

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The increase is enormous – could it be even bigger?

While the 17% increase of last year on the housing market is in fact noteworthy, and so is the 28% increase starting from the second quarter of 2014, there have already been larger ones in earlier years. In 1998, real estate has become 20% more expensive in Hungary, which was followed by a 41% rise in 1999, and a 37% rise in 2000. This means that in nearly three years’ time, the costs of buying a housing property have become twice as much. Real value increased to a somewhat more moderate extent, but it still reached nearly 80%.

This era was followed by the period of loans with subsidised interest rates, which resulted an even further rise in prices. In 2002, it was almost 17%, and nearly 21% in 2003 – in 2004, housing became “only” 6% more expensive. Again, the costs of buying housing has increased by 50% in these three years, while real value has become 28% more expensive.

This demonstrates that the current rise isn’t even that extraordinary, especially after the dramatic decreases experienced in the years of the recession: the increase that happened in the entire year of 2015 failed to measure up to the biggest rises in price.

The second part of the article will examine if the rises have an actual limit, if the current demands can be continued, and also the links between wages and how real estate prices change.

(Source: http://www.portfolio.hu)

 

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