Macroeconomic factors in 2024 generally supported an upturn in domestic housing demand. Employment rose to a historic high during the year, and although labour market tightness eased the period was characterised by dynamic wage growth overall. In line with falling inflation, real income increased by 7 to 8 per cent in 2024 H1, exerting a positive impact on consumer confidence and the propensity to invest in housing projects. Looking ahead, housing market demand is expected to continue strengthening, presumably on the back of household savings coming into the market.
In 2024 Q3, housing market turnover rose by 16 per cent on average in Hungary and by 31 per cent in Budapest year-on-year. The total number of transactions concluded in the past year amounted to 144,000 in the third quarter, which is 10 per cent below the long-term average annual number of transactions. In addition to improving macroeconomic factors, the increase in housing market transaction volumes was also supported by lower interest rates on loans, the emergence of deferred demand in 2023 and the high loan amounts available under the HPS Plus programme. As significant household savings are expected to enter the market next year, the effect of purchases brought forward may have also increased in 2024 H2. With demand strengthening, the median negotiated discount rate fell to 3.0 per cent in Budapest and 5.0 per cent in rural areas by 2024 Q3, while sellers reduced their prices to a lesser extent than usual in 2023 during the advertising period.
Nominal house prices continued to appreciate in 2024 Q2. House prices rose by 9.3 per cent in Budapest, 8.7 per cent in other cities and 9.1 per cent in villages over a year. Preliminary data suggest that annual house price appreciation may have accelerated to 14.7 per cent in Budapest in the third quarter, and from 9.3 per cent to 12.8 per cent on average across the country, significantly above the EU average. In 2024 Q2, the estimated deviation of house prices from the level justified by fundamentals narrowed to 11 per cent nationally, down from 23 per cent one year earlier. We forecast house price appreciation to remain dynamic in 2024 Q4. The ban on short-term rentals in District VI of Budapest could push some homeowners towards long-term rentals, increasing the supply of sublets.
In the first eight months of 2024, in parallel with the rebound in housing market demand, the volume of housing loan disbursements also increased significantly by 148 per cent year-on-year, driven by the expansion of market-based lending and the launch of HPS Plus. On average, households applied for HUF 26 million in interest-subsidised loans under the programme in the second quarter, compared to an average of HUF 19 million for loans taken out for purchasing pre-owned homes on market terms. For both new and pre-owned homes, the availability of house purchases involving loans has improved significantly, the latter also supported by HPS Plus for those intending to have more children. Based on the number of children planned by couples under the previous HPS scheme, it is estimated that the number of persons eligible for housing support grants may have decreased by around two thirds from 2024. According to the Lending Survey, banks perceived a decline in demand for housing loans in 2024 Q3 with unchanged credit conditions, but they expect demand to pick up again in the next six months. The voluntary APR ceiling in place during the first half of the year and increasing bank competition have resulted in persistently low premiums of below 1 per cent on market-based housing loans, while the average interest rate paid by the customer, including subsidised schemes, fell to 5.5 per cent and the average APR for market-based housing loans fell to 6.8 per cent by August 2024.
In the first three quarters of 2024, 8,600 new residential buildings were issued occupancy permits in Hungary, meaning that the number of new housing units completed in Hungary decreased by 20 per cent, while in Budapest it fell by 18 per cent versus the same period of the previous year. During the same period, building permits were issued for 14,600 new homes nationwide and for 3,400 new homes in Budapest, representing a year-on-year decline of 2 per cent and 34 per cent, respectively, and looking ahead to H1 2025 this also reflects subdued housing construction volume. New housing developments by construction companies, and thus supply, are only slowly adapting to the rising demand, but mounting home construction costs have become less of a constraint on supply growth. A narrow range of banks, 11 per cent in net terms, tightened their financing conditions for housing projects in 2024 Q3, but most banks have seen a pick-up in demand for housing project loans, which they expect to continue strengthening. In Budapest and in the countryside, the volume of new home developments is stagnating at a low level, and the number of new homes advertised for sale also fell in the third quarter. At the same time, both in rural areas and in Budapest, turnover in the new homes market picked up significantly, in line with the recovery in the used homes market. The average price per square metre of newly constructed homes in Budapest was HUF 1.53 million at the end of 2024 Q3, reflecting an annual price increase of 5 per cent.
