Hungary’s house prices in freefall

Lalaine C. Delmendo | January 11, 2021

It is something of a disaster.  During the year to Q1 2020, the price index for second-hand homes in Hungary has plunged 18.3% - in sharp contrast to the previous year’s 14.5% price rises and the first y-o-y property price decline in seven years, according to the Hungarian Central Statistical Office (KSH).

Hungary house prices

When adjusted for inflation, residential prices actually fell 21.7%. On a quarterly basis, second-hand home prices fell by 6.1% in Q1 2020 (-7.5% inflation-adjusted).

The primary market is in an even worse condition, with the price index of new homes plummeting by 21.2% during the year to Q1 2020 (-24.5% inflation-adjusted). Quarter-on-quarter, new home prices fell 9% (-10.3% inflation-adjusted).

The pandemic has also adversely impacted the rental market. In April 2020, the number of flats for rent in Budapest – a city that is a big tourist destination – surged by 22% as compared to February 2020. A large number of dwellings, which had been previously rented out short-term to tourists, have been shifted to the long-term rental market, according to the Housing and Real Estate Advisory Board (LITT). Unsurprisingly, the average asking prices for flats to let has fallen in most districts of Budapest, especially in the downtown districts.

In Q1 2020, the average price of second-hand homes in Hungary was HUF 16 million (€ 44,415) while it was HUF 24.7 million (€ 68,565) for newly built homes.

Even before the pandemic, demand was already falling. The total number of second-hand homes sold fell by 8.7% to 141,115 units in 2019 from a year earlier, in contrast to a 4.7% growth in 2018.

New dwelling completions, mostly started before the pandemic, rose strongly by 34.4% y-o-y to 8,697 units in H1 2020. But new dwelling permits fell by 31.6% y-o-y in H1 2020, according to KSH.

The situation is not expected to improve during the remainder of the year given the huge uncertainty pose by the pandemic.

Hungary’s economy shrank by a huge 13.6% y-o-y in Q2 2020, in sharp contrast to annual expansions of 2.2% in Q1 2020, 4.5% in Q4 2019, 5% in Q3 2019, 4.9% in Q2 2019 and 5.3% in Q1 2019, according to KSH. It was the biggest y-o-y contraction ever recorded.

The economy is expected to contract by 7% this year before bouncing back with a GDP growth of 6% in 2021, based on projections from the European Commission.

Demand is plunging

The total number of second-hand homes sold fell by 8.7% to 141,115 units in 2019 from a year earlier, according to KSH. It was the first decline in seven years, following annual growth of 4.7% in 2018, 4.4% in 2017, 8.2% in 2016, 18.3% in 2015, 27.8% in 2014 and 3.7% in 2013.

By region:

  • In Central Hungary, second-hand home sales plunged by 18.3% y-o-y to 39,950 units in 2019. In Budapest, sales fell by almost 21% to 26,493 units in 2019 while sales in Pest dropped 12.4% to 13,457 units.
  • In Transdanubia, second-hand home sales were down 4.3% y-o-y to 43,407 units last year.
  • In Great Plain and North, sales fell by 4.3% to 57,758 units in 2019 from a year earlier.

The coronavirus pandemic has aggravated the situation, with total second-hand home sales in the country plunging by almost 55% y-o-y to just 17,088 units in Q1 2020. The Q2 figures were expected to be much worse.

Hungary sale 2nd hand homes

“The more unfavourable labour market environment projects a deterioration in households’ income prospects, which may give rise to a decrease in willingness to invest and in housing market demand,” said the central bank.

Local house price variations

Budapest has the most expensive housing in Hungary, with the average price of second-hand homes reaching HUF 34.1 million (€ 94,659) in Q1 2020. It was followed by Pest, with an average house price of HUF 24.3 million (€ 67,455).

In Transdanubia region, the average price of second-hand homes ranged from HUF 11.8 million (€32,756) to HUF 17.4 million (€48,300).

Hungary mean price sold 2nd hand homes

Great Plain and the North region had the least expensive housing in the country. In Northern Hungary, the average house price stood at HUF 9.1 million (€ 25,260) in Q1 2020 while it was about HUF 11.3 million (€ 31,368) in the Great Plain.

Purchases of real estate in Hungary by foreigners

During 2019, the total number of residential properties bought by foreigners in Hungary rose by 6.3% to about 3,753, following a 10% growth in the prior year, according to the country’s official government site

Budapest accounted for more than 77% (or 2,896 properties) of the total properties sold to foreigners last year. About 52.3% of which were purchased by Chinese citizens, 22% from the EU, 10.6% from Israel, 4.4% from Russia and 1.9% from Turkey.

District 7 was the most popular location to foreign homebuyers with 470 properties sold, followed by District 6 and District 8.

While foreign homebuyers made up only about 2.5% of all sales transactions nationwide, they reach more than 10% in Budapest and about one-fourth of total sales in the inner districts of Pest. This is one of the reasons of the huge price difference between the city and the whole country. A foreigner buying a home in Budapest spends on average just above HUF 40 million (€111,000).

Though this year it is not surprising to see a plunge in the number of foreign homebuyers in the country due to the COVID-19 pandemic.

Hungary properties purchased foreigners

Hungarian law requires that real estate purchases shall be concluded through private contract (purchase agreement) countersigned by a lawyer. Non-Hungarian citizens must gain the approval of the relevant Administrative Office to purchase property as a private person. Most foreigners should receive a permit within 2-3 months.

Most lawyers advise foreign nationals to set up a company registered in Hungary in order to purchase property. In this case, no permit is needed. This is a fairly swift and easy procedure (taking 1-2 days), and all expenses can be written off.

Completions up, permits down

All of Hungary’s three large regions saw a strong rise in housing completions in the first half of 2020:

  • In Central Hungary, newly built homes soared 22.7% y-o-y to 3,728 units. In Budapest, completions rose by more than 22% to 1,657 units in H1 2020 while sales in Pest increased 23.1% to 2,071 units.
  • In Transdanubia, newly built homes rose by 20.7% y-o-y to 2,899 units.
  • In Great Plain and North, completions doubled y-o-y to 2,070 units in H1 2020.

However, completions are expected to decline in the coming months with the sharp drop in permits this year due to coronavirus-related restrictions.

In H1 2020, the total number of permits issued for residential buildings plunged 27.4% y-o-y to 5,437, based on KSH figures. Likewise, dwelling permits also declined by 31.6% to 12,475 units in H1 2020 from the same period last year.

Hungary housing credits construction

The total value of housing credits for construction surged 24.4% y-o-y to HUF 87.26 billion (€ 241.92 million) in 2019.

Hungary dwellings stock

As of early-2020, the total dwelling stock in the country stood at 4,474,531 units, up 0.4% from a year earlier, according to KSH.

Is this housing cycle over?

Hungary’s residential mortgage market ground to a halt in 2009 as a result of the decline in the value of the Forint against the Euro. A large portion of mortgages were backed by foreign currency loans, burdening homeowners with swelling repayments, and prompting buyers to exit the market.   During Hungary’s housing boom (1998-2007), house prices HAD soared by 266% (93% inflation-adjusted). But during the global financial meltdown, house prices fell by 21% (36% inflation-adjusted) from 2008 to 2013.

The introduction of an early repayment scheme in September 2011 unilaterally changed the terms of all foreign currency loan contracts and allowed debtors to make a one-off repayment of their loans at a discounted exchange rate.

As of December 2015, only 0.2% of the stock of housing loans was in foreign currency, down from 52% in December 2014. Legislation adopted in November 2014 required financial institutions to convert all outstanding foreign currency-denominated loans into HUF claims.

The housing market started to recover in 2014, with house prices rising by about 6.6% (7.3% inflation-adjusted). House prices have been rising by double-digits annually since then, surging by a total of 120% (99% inflation-adjusted) over the past six years (2014-2019).


Year Nominal Inflation-adjusted
2008 0.21 -3.87
2009 -9.26 -13.75
2010 0.53 -3.63
2011 -3.90 -7.68
2012 -6.56 -11.34
2013 -3.57 -4.28
2014 6.56 7.30
2015 14.36 13.77
2016 15.37 13.96
2017 14.65 12.08
2018 16.51 12.85
2019 17.77 13.90
Sources: MNB, Global Property Guide

Part of the recovery in housing demand during 2014-5 was caused by government measures. First, at the beginning of 2013, the government increased the amount of 5-year loan subsidies, the maximum value of subsidized loans, and the loan house price threshold, causing significantly stronger credit demand in the second half of 2013.

Hungary housing premits

From July 1, 2015 a non-refundable subsidy, the family housing allowance (CSOK) became available for buying new- and used homes, for apartment expansions, and for home construction. It was expanded in March 2018, allowing families returning from abroad and those already owning a property about to buy new or resale homes to apply for the CSOK.

Then last year, the preferential loan under CSOK was extended. The government now repays HUF 1 million (€ 2,772) of the mortgage loans of families with at least two children. Moreover, every woman under the age of 40 is also eligible for a CSOK interest-free loan when she first gets married.

By end-2019, more than 115,000 families had already benefited from this program, receiving a total of HUF 275 billion (€763 million). The average amount of loan per disbursement was HUF 2.4 million (€ 6,662).

In addition, the National Assembly lowered the VAT rate for new dwelling units to 5% in December 15, 2015, sharply down from the previous 27%. The new VAT rate was effective from 2016 to 2019, and has now been extended to December 31, 2023, but is only applicable for properties with a building permit obtained by November 1, 2018.

As a result of the surge in demand for new dwellings, residential construction rose sharply, almost half the new supply was located in Budapest and Pest. In 2019, the total number of newly built dwellings in Hungary soared 19.5% y-o-y to 21,127 units, following annual rises of 22.9% in 2018, 44% in 2017 and 31.3% in 2016, based on KSH figures analyzed by Global Property Guide.   

Now it seems that the boom cycle has ended, with uncertainty ahead for the Hungarian housing market. However the government is making some efforts to stimulate demand. Proposed measures include a two year increase of the Home Purchase Subsidy as well as lower interest rates on housing loans and making bank financing more accessible through credit guarantee institutions.

“Everyone is watching for signs of a housing boom following the end of the pandemic when macroeconomic factors improve and the wait-and-see buyers bring their pent up demand to the market,” says InvestCEE’s Central European Finance and Investment team.

Rental yields are good in Budapest

Gross rental yields in Budapest are moderately good. In Buda, Budapest’s greener side, apartments have relatively higher yields ranging from 5.63% for a smaller-sized apartment of 90 sq. m. to 5.73% for a larger apartment of 120 sq. m., based on a Global Property Guide research. Apartments in Pest, Budapest’s business and commercial centre, have slightly lower rental yields ranging from 5.16% to 5.24%.

The average monthly rents for brick apartments in Budapest ranged from HUF2,400 (€ 6.7) to HUF3,600 (€ 10) per square metre (sq. m.) in 2019. Districts 13, 5 and 1 were the most expensive areas while Districts 4 and 10 and the peripheral districts on the Pest side were the cheapest.

In Budapest, rent movements for apartments have been varied. In most districts, rents rose between 5% and 10% in 2019 from a year earlier, according to Otthon Centrum’s Housing Market Monitor Q4 2019. In Districts 1, 2 3, 11, and 12 in Buda and Districts 10 and 14 in Pest, rents increased over 10% last year.

However these rent increases have been easily offset by a sharp decline in rents this year due to the coronavirus pandemic and the halt in tourism.

“In March and April, many landlords voluntarily offered trusted tenants a decrease in rent, because they feared losing them and not finding new renters to replace them,” said Ádám Heinrich of Budapest-based real estate brokerage firm OTP Ingatlanpont. “The market was also hit by airbnb flats, which were left without tourists. This also helped in the decline of prices, as many tenants took advantage of the opportunity to move to a cheaper but better-equipped apartment.”

Low interest rates

Housing loan interest rates remain low. In July 2020, the average interest rate on housing loans was 4.63%, almost unchanged from 4.62% a year earlier and 4.51% two years ago, according to the European Central Bank (ECB).

Average interest rates on loans for house purchases in July 2020:

  • Initial rate fixation (IRF) up to 1 year: 3.46%, sharply down from 5.75% a year earlier
  • IRF over 1 year and up to 5 years: 4.99%, down from 5.24% a year ago
  • IRF over 5 years: 4.62%, slightly up from 4.59% a year ago

More housing is now being bought with loans. From only around 33.5% in 2015, about 47% of housing market transactions were accompanied by a loan by end of 2019, according to MNB’s Housing Market Report – June 2020.

Hungary interest rates

Aside from low interest rates, part of the recently rising demand for loans is attributable to the popularity of subsidized lending schemes such as the Family Housing Subsidy Scheme (CSOK). In the past three quarters, subsidized loans accounted for about 36% to 39% of total new housing loans, according to the central bank.

Mortgage market remains small despite strong growth

The value of housing loans outstanding increased 9.3% to HUF 3.63 trillion (EUR 10.1 billion) in 2019 from a year earlier, based on figures from the KSH’s Residential Mortgages 2019 report.  The value of new housing loans rose 6.5% to HUF 876 billion (€ 2.43 billion), according to KSH’s Residential Mortgages 2019 report.

The size of the mortgage market remains small at about 8% of GDP in 2019, almost unchanged from a year earlier, according to KSH.

  • Loans borrowed for the purchase of second-hand homes, which constituted more than half of new housing loans, were down 5% y-o-y to 63,814 in 2019 (but the average loan amount increased 5.6% y-o-y to HUF 9.4 million (€26,092)).
  • The number of loans for housing construction increased by nearly one third to 19,249 in 2019.
  • Loans for buying new homes, which represented 8.4% of new loans, surged 24% to 9,353 in 2019 from a year earlier. The average amount of loan stood at HUF 11.4 million (€31,644) last year, up 3.6% from the previous year.

“The volume of new loans in the first quarter of 2020 also evidences strong demand: the value of contracts concluded in a month was on the rise in March as well,” said the central bank.

Hungary new housing loans disbursed

“However, in the remaining part of the year a decline in residential mortgage lending may be expected.”

Despite the continued robust growth, “compared to the size of the economy this still means that there is plenty of room for growth,” said the central bank in its June 2020 Housing Market Report. “Accordingly, the depth of mortgage lending in Hungary – in addition to Romania – is the lowest compared to the EU.”

Hungary  housing loans outstanding

The share of “problem-free” loans has been steadily improving in the past years, rising from 89% in 2016 to 93% in 2018 and finally to 97% last year, according to the KSH. In 2019, the number of non-performing loans fell to 18,000, from 34,000 in the previous year.

Economy contracts for the first time in 8 years

Hungary’s economy shrank 13.6% y-o-y in Q2 2020, its biggest contraction ever, with the COVID-19 pandemic hurting most sectors of the economy.  The economy had previously grown by a robust 4.9% in 2019, following expansions of 5.1% in 2018, 4.3% in 2017, 2.2% in 2016, 3.8% in 2015 and 4.2% in 2014, according to the International Monetary Fund (IMF).

During the year to Q2 2020:

  • Household spending dropped 8.4%;
  • Investment plunged 13.5%;
  • Exports and imports fell by 24% and 15.8%, respectively;
  • Government spending increased 5.8%

Hungary gdp growth

The economy is expected to contract by 7% this year before bouncing back with a GDP growth of 6% in 2021, based on projections from the European Commission.

Unemployment stood at 4.8% in the three-month period ending July 2020, up from 3.4% a year earlier, according to KSH figures.

The country’s inflation edged up to 3.9% in August 2020, up from 3.8% in the previous month and near the top of the central bank’s target range of 2% to 4%.

Orban’s power grab continues

Since coming to power in 2010, Hungary’s nationalist prime minister Victor Orbán has concentrated power and media organs in his hands, and regularly clashes with Brussels over migration and rule-of-law issues.

Economic growth has boosted his popularity, propelling him and his party, Fidesz (the Hungarian Civic Union) to victory in the 2014 elections, and again in the 2018 national elections, when the Fidesz–KDNP alliance won a two-thirds parliamentary majority, with 133 seats out of 199.

In a move towards the creation of an "illiberal" state, in April 2017 the Hungarian Parliament imposed stringent restrictions on foreign universities, a move primarily directed towards the Central European University (CEU), founded by philanthropist and Hungarian NGO supporter George Soros. Forbidden to accept new students after January 1 2019, the CEU re-launched all U.S. accredited degrees in Vienna from September 2019.

Orban’s growing authoritarianism has met resistance. In May 2017, large anti-corruption street protests occurred in Budapest, expressing support for CEU and NGOs. During the same month, two United Nations Special Rapporteurs also expressed their objection to the Hungarian government’s draft "Bill on the Transparency of Organisations Financed from Abroad" that would limit NGO activities. The bill was eventually passed as law in June 2017.

Orban’s latest target is the University of Theatre and Film Arts in Budapest (SZFE), which the government identified with the “left-liberal” ethos. This coincides with yet another move to shut down the country’s last independent political radio station, Klubrádió. In September 2020, the state media authority, NMHH, announced that it would not extend Klubrádió’s broadcasting license due to expire in February 2021 because of numerous but unspecified irregularities, sparking fresh concerns about media freedom.


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