Budapest, 28 November 2022 – Overall the domestic housing market is characterized by the narrowing of the supply and demand side. In September 2022, the number of transactions in the housing market had already decreased significantly, by 34 percent year on year, and the volume of housing loans concluded also declined by more than a third. After the extraordinary rise of 24.8 percent in 2022 Q2, the annual increase in house prices may have slowed down significantly in 2022 Q3. The number of new apartments completed may temporarily grow this year; however, looking ahead, the supply of new homes can be expected to fall due to a decrease in demand. In the new housing market in Budapest, the available supply and the number of apartments in newly announced projects are also at a low level.
In 2022 H1, in the favourable macroeconomic environment, the housing market reached the top of its multi-year cycle. In 2022 Q3, there are several signs implying that there has been a turnaround in the Hungarian housing market and looking ahead we can expect further decline in the housing market demand, in line with the economic outlook becoming uncertain.
Based on the MNB house price index, house prices rose at an annual rate of 24.8 per cent on a national average in 2022 Q2. In nominal terms, this was the highest rate of price appreciation measured in the current 9-year housing market cycle. In real terms however, it already falls short of the highest value. In provincial towns, housing prices rose more than the national average, appreciating by 31.2 per cent in annual terms, while house prices in Budapest increased by 20.4 per cent in one year. The record high price dynamics caused the overvaluation of house prices to reach a high level at 21.5 per cent on a national average. Based on preliminary data, real annual growth in house prices is expected to decelerate significantly, from 12.8 per cent measured in Q2 to 1.7 per cent in 2022 Q3.
According to our estimate, in line with declining demand the number of transactions dropped by 22.6 per cent in the domestic housing market, and within that the annual decline in September was as high as 34.2 per cent. In 2022 Q2, the volume of housing loan contracts concluded by credit institutions was at a record high. Disbursements in September, however, already fell by 38 per cent in annual terms. The correction was due to the tapering of new contracts concluded under the FGS Green Home Programme (FGS GHP), demand brought forward to previous months owing to the rising interest environment and the decline in housing market activity. As a result of the continued rise in interest rates on housing loans and increasing prices in the housing market, housing affordability for households not or to a lesser extent eligible for home purchase subsidy fell to a level unseen for years. Based on the responses to the Lending Survey, banks tightened the conditions of access to housing loans in 2022 Q3, and almost all institutions saw a decline in credit demand. Looking ahead to the next half year, tightening may continue by raising the spreads, and in addition to this, the vast majority of banks anticipate a further decline in credit demand.
In 2022 Q1-Q3, the number of newly completed homes rose by 7.7 per cent due to the increase in home construction in the countryside. According to our forecast, as a result of the significantly higher number of new building permits in the latest quarters, about 23,000 new homes may be completed in 2022, which would represent annual growth of 17 per cent. On the other hand, we do not expect any further increase in the number of completions in 2023. The market of new homes in Budapest shrank both on the demand and supply sides. In 2022 Q3, looking at new condominium projects under development and sales in the capital, the available supply fell by 36 per cent in year-on-year terms, due to purchases brought forward in the first half of the year. In the third quarter, the number of new homes sold in Budapest fell by 40 per cent both in year-on-year and quarter-on-quarter terms, while unsold supply was characterised by dynamic price increases.
http://www.mnb.hu/en/publications/reports/housing-market-report