Up to 150 000 properties could be sold in Hungary this year
May 30th, 2016
Otthon Centrum (Home Centre) estimates the total number of sales on the Hungarian real estate market up to 135 000 in 2015, while the company predicts a sum of 150 – 155 000 for the current year, as the newly installed family support benefit program (CSOK) not only will have a major effect on newly constructed housing, but due to the recent modifications, it will also make a mark on the market of pre-owned properties. This also makes developers unable to keep up with the increased amount of demands in 2016, which will result in a (short term) general price rise between 5% - 25% in case of new estates.
CSOK’s target population can be several hundred thousand families. Examining families with children, it becomes apparent that alongside Budapest, Pest county is accounted for the largest number of families with two and three children. There also are a high number of them in the Northeast region of the country and Hajdú-Bihar. However, this isn’t really an indicator of CSOK’s future extent, as it will be decided by the willingness of these families to seize the opportunity and purchase a property to live in or build on.
“Approximately 10-20% of those who qualify are predicted to apply for the benefit. Between the years 2016-2019, we’re expecting a total amount of 50-100 thousand families to apply for CSOK” – commented Gábor Soóki-Tóth, head analyst of Otthon Centrum. Comparing the connection between the sizes and prices of the properties and the provisional buying power based on the benefits and future loans, it is apparent that a growing interest is expected in the capital’s suburban areas with lower price rates, the agglomeration area, plus rural towns and locations that attract a considerable amount of workforce. As predicted, not only the activity of developer companies will be on the rise but also that of individual constructors.
The estimated number of 150-155 000 transactions’ regional distribution can be modelled by taking into account the fluctuation of the country’s socioeconomic tendencies, with an emphasis on migration: besides the capital, the real estate market will experience higher activity in primarily the West, the areas pertaining to Lake Balaton and the surroundings of major cities and towns this year.
Due to the reduced taxes in case of newly constructed housings (5% VAT) and the expected rise in activity caused by CSOK, many previously cancelled or halted projects are set to be restarted by developers. Based on the amount of construction permits issued in the past 1,5 – 2 years, the number of new housings can reach or even surpass 10-12 000 by the end of 2016.
It’s quite a dilemma to see the degree to which general prices could change due to the increase in supply. According to Otthon Centrum’s experiences, there was a rather significant growth in the number of inquiries made in the months of January and February. Regarding transactions, the number of contracts realised outside the capital hasn’t fluctuated much compared to the same interval last year, while there were significantly less transactions in Budapest in January. This indicates that both buyers and sellers are anticipating the further effects.
The number of registered transactions in particular segments were considerably low, not enough to draw defining conclusions based on them. The prices of new housings marketed by Otthon Centrum in the capital and in the agglomeration area have risen by 20-30% compared to the prices effective in December 2015. In the countryside, pre-owned apartment and townhouse flats have become only moderately more expensive, with a mere 1-2% rise in prices, in most counties and regions. With regards to family homes, no noteworthy changes were registered – their prices have only risen by 1-2% as well in Budapest.
How did 2015 turn out?
The increased activity on the market last year was, in addition to buyers with intentions to invest, founded by those households which postponed their decisions to purchase their new homes in the years of the recession. “As a result, compared to the year before, the number of transactions on the residential estate market has grown 20%, and based on Otthon Centrum’s estimates, approximately 135 000 contracts were realised in 2015” – explained Gábor Soóki-Tóth.
The increased activity, however, presented itself with different degrees of intensity in different areas. In the Eastern part of the country, transactions are mostly concentrated on cities and their surroundings. The number of transactions showed quite a low value when divided amongst 1000 tenants: in the Eastern regions, 3-4 transactions were finalised per 1000 people, while in the Western half, the same number was 4.5-5. In the agglomeration area of the capital, the specific number of transactions was smaller, which was mostly caused by the local towns’ relatively large populations, the predominance of family homes, and in certain occasions by the tendency of moving out from the capital city, reducing the level of suburbanisation.
Newly constructed housings, similar to previous years, only were accounted for a mere 3% of the total yearly activity on the residential estate market in 2015. Constructions experienced a significant setback due to the recession. In the past few years, a slight growth could be noticed. However, the results in home construction considerably stayed below the 1% annual mark that should be necessary for the renewal of dwelling stock.
The average price of pre-owned flats differed according to type and location in 2015, compared to 2014. Otthon Centrum reckons that the largest rise, around 40%, was registered in the group of panel flats and buildings in the capital. On the other hand, in East-Hungary, the average price of pre-owned, brick-built townhouses showed a small amount of decrease.
The most dynamic market in all segments is the flat market in the capital, in which the prices of panel flats, family homes and traditionally built townhouse flats have risen by 19% and 24%. In the Western region, the average prices have increased by 7-11% in case of family homes and brick-built flats – while the price rates of panel flats has grown twice as much, by 21% in comparison to the previous year.
A 8-10% growth was measured in the pricing of pre-owned, brick-built townhouse flats and family homes in Pest county and the Western region. The average prices of panel flats in the Eastern half of the country have increased in a similar fashion. The prices of panel flats in Pest county and family homes in Eastern Hungary stagnated.
The increased demands in 2015 were also demonstrated by the buyers’ weakened capacity to obtain a price reduction. In the years of the recession, the general discount was a 10% margin in the case of the most affordable and sought-after panel flats, while in the case of family homes, the bargain could result in a final price reduced by as much as 18% or more. The same margin in 2015 has decreased to 6.45% in the case of panel flats, 13.54 in the case of family homes and 8.14 in the case of pre-owned, brick-built townhouse flats.
A similar tendency was present regarding the time needed to finalise a transaction. Those who aim to sell their family houses are still expected to have the most patience, as it takes a longer time. According to Otthon Centrum’s experiences, it averagely takes almost 6 months in this category for the seller and their buyer to find each other and seal the deal. However, this interval is shorter than the average selling time required in the previous year.
In 2015, panel flats found their new owners the quickest (averagely, in a month, which is half of the time that was required to sell them the year before). Of course, averages can still mean unusual extremes and intervals – the scatter of these values is relatively large –, but they still show the ongoing tendencies fairly well. An increase in demand can result in a shorter time to sell properties for sellers, and a smaller capacity to bargain for the buyers.
(Source: http://realista.hu/ingatlanpiac/iden-akar-150-ezer-lakast-is-eladhatnak/130364)
Related articles:
Hungarian Real Estate Market on Pace for another Year of Record-breaking Sales
Property Prices Skyrocket throughout Hungary
Better hurry: estates qualifying for CSOK are getting more expensive
back