13 November 2024
In 2024 Q2, the rise in primary yields came to a halt in all segments of the commercial real estate market. Based on the RICS survey, the market cycle may have reached its bottom. In contrast to several countries in the CEE region, Hungary’s investment turnover in 2024 H1 decreased year-on-year, and the larger part of the volume was linked to domestic investors. In 2024 H1, credit institutions disbursed 37 per cent more project loans secured by commercial real estate compared to the previous year’s low base.
In 2024 H1, yields stopped rising in the commercial real estate market, but lower-than-expected GDP growth was not yet able to significantly support domestic CRE activity. This is also reflected in the cyclical perception of the market. In the July survey by the Royal Institution of Chartered Surveyors (RICS) nearly two-thirds of market professionals believed that the market hit the bottom of its cycle, while another 19 per cent already indicated a recovery phase. Looking ahead, faster and broader-based GDP growth may mitigate cyclical risks, but some segments will continue to face challenges stemming from structural changes.
Among the CRE segments, the performance indicators of the hotel sector improved, mainly due to foreign guest stays, but in conjunction with rising real wages the number of overnight stays by domestic guests also increased year-on-year in 2024 H1. In line with the improving trend in consumer confidence, retail sales rose and vacancy rates in this segment also improved, both in rural areas and in the capital’s shopping centres.
The vacancy rate in the Budapest office lease market rose by 0.6 percentage points to 13.9 per cent in 2024 H1, while the industrial-logistics market recorded a decline of 0.1 percentage point to 8.5 per cent. Given the levels of demand seen in recent quarters and the amount of new floorspace slated for completion, the indicator is expected to rise further in both segments, and there is still a risk of oversupply.
In 2024 H1, investment turnover on the domestic CRE market amounted to around EUR 180 million, down 21 per cent on the already low level from 2023 H1 and it is mainly linked to domestic investors. Increased yields, still high financing costs in euro and subdued rental demand continue to encourage investors to wait, portending low investment flows for 2024 as a whole. In contrast to the domestic trend, average investment turnover in the CEE region already increased by 35 per cent.
In 2024 H1, banks disbursed 37 per cent more CRE-backed project loans compared to the low base from a year earlier. Except for hotels and other real estate, all property types showed an increase in the volume of new loans. However, risk aversion continues to dominate market perceptions. According to the MNB Lending Survey, banks tightened lending conditions mostly for office buildings in 2024 Q2 and they plan to tighten them further in 2024 H2. In October 2023, due to potentially rising risks in the CRE market, the MNB’s Financial Stability Board reactivated the Systemic Risk Capital Buffer (SyRB) in a revised form for preventive purposes from July 2024.
https://www.mnb.hu/en/publications/reports/commercial-real-estate-market-report