Budapest, 31 May 2024 – The macroeconomic fundamentals underlying the domestic housing market improved substantially from 2023 H2, driving an upswing in both the number of housing market transactions and the residential real estate lending. By end-2023 the overall domestic annual nominal house price dynamics rose to 5.8 per cent, and prices could also continue to grow in 2024 Q1. The overvaluation of house prices relative to the relevant macroeconomic fundamentals stagnated at about 12 per cent during the past year. Introduction of the HPS Plus facility significantly improves the affordability of homes, particularly in the higher price category, such as used homes in Budapest. The number of newly built homes delivered dropped by 9 per cent, while that of building permits issued plummeted by 39 per cent year-on-year in 2023. The number of home constructions is expected to continue to decrease this year.
The macroeconomic fundamentals underlying housing market developments improved somewhat from the end of 2023 and triggered an upswing in the domestic market. Employment was at a historical high in 2023 Q4 and, along with a double-digit increase in gross wages, real incomes returned to a growth path as inflation was curbed. Housing market activity is being driven by improving consumer confidence, better lending conditions and the renewed housing subsidies available from 2024, which added momentum in the first months of 2024 as well.
By end-2023, annual housing price dynamics in Hungary rose to a nominal rate of 5.8 per cent, while in real terms a decrease of 1.8 per cent was still recorded. In the first quarter, the rate of nominal price appreciation may have accelerated further to 7.2 per cent. Overpricing in the house market relative to the macroeconomic fundamentals stagnated at a significantly lower level compared to the 2022 peak, at about 12 per cent as a national average during the past year.
The total number of transactions in the housing market was extremely low in 2023, in particular in the first half of the year, falling short of the figure for 2022 by 21 per cent. Housing market turnover already began to recover in late 2023, and 2024 Q1 saw a year-on-year increase of 30 per cent in the number of sale transactions at the national level. Rents rose by 12.6 per cent, exceeding house prices, and thus the annual rental yield also increased compared to the same period of the previous year.
The upswing in housing market turnover was accompanied by an expansion in housing loans, as the volume of housing loan contracts concluded in the first two months of 2024 more than doubled year-on-year. Demand for loans was driven by improving economic prospects in the wake of disinflationary developments, lower lending rates and renewed housing subsidies. The latter also contributed to an increase in average loan amounts. The Lending Survey shows that the banks left their housing loan conditions unchanged in 2024 Q1 as well, but some applied the higher LTV limit to first home buyers. Looking ahead, the banks expect a further increase in housing loan demand with unchanged credit conditions. In terms volume, a total of 83 per cent of all housing loan contracts signed in February 2024 were concluded by the banks below the APR ceiling of 7.3 per cent. Intro-duction of the HPS Plus facility significantly improves the affordability of homes, particularly in the higher price category, including pre-owned homes in Budapest. However, housing has become considerably less affordable for families with two children, who are not planning to have a third.
Insufficient demand continues to be the main limiting factor regarding the output of domestic construction companies. Home construction costs continued to increase at an outstanding – albeit decelerating – rate in comparison to the European Union. Occupancy permits were issued for 18,600 newly built homes in 2023, 9 per cent less than in the preceding year and equivalent to 0.41 per cent of the total housing stock recorded at end-2022. The renewal rate is thus significantly lower in Hungary than the average rate of 1.05 per cent recorded in other countries of the region. The number of building permits issued dropped by 39 per cent year-on-year. In 2024 Q1, the year-on-year decrease in the number of homes completed and building permits obtained continued. Turnover in the Budapest new homes market reflected increased activity in 2024 Q1, as 1,307 new condominium flats were sold in Budapest, 84 per cent more than sales at the lowest point in the same prior-year period. An outstanding number of newly built homes were on offer in the market to meet the growing demand, as a result of which the number of homes still available for buyers in Budapest increased somewhat on a year-on-year basis. The average price per square metre of newly constructed homes in Budapest rose by 2.8 per cent year-on-year, to HUF 1.47 million by the end of 2024 Q1.
http://www.mnb.hu/en/publications/reports/housing-market-report