Amid the macroeconomic shift toward recovery, the Hungarian housing market shows early signs of re-acceleration in price growth, as reduction of interest rates revives mortgage lending and supply remains limited.

This extended overview from the Global Property Guide covers key aspects of the Hungarian housing market and takes a closer look at its most recent developments and long-term trends.

Table of Contents

• Housing Market Snapshot
• Historic Perspective
• Demand Highlights
• Supply Highlights
• Mortgage Market
• Rental Market
• Socio-Economic Context

Housing Market Snapshot

The preliminary figures for the aggregated house price index published by the Hungarian National Bank (MNB) show a slight fall in Q4 2023 compared to the previous quarter (-0.7% nominal and -0.95% inflation-adjusted). Year-on-year price growth, however, picked up pace in the second half of 2023 - for the first time since early 2022 - registering at 4.42% (-9.47% inflation-adjusted) in Q3 and 5.80% (-1.79% inflation-adjusted) in Q4.

Hungary's house price annual change

The dynamic did not present equally across the country's regions: year-on-year growth in nominal prices was most pronounced in the cities of Southern Transdanubia (10.9%), Northern Great Plain (8.6%), and Northern Hungary (8%), while the cities of Pest region demonstrated a slight decline (-0.7%).

In terms of reported dwelling sales, monitored by KSH, the highest mean price of second-hand units per sqm was expectedly recorded in Budapest, followed by the central region of Pest, Central Transdanubia, and Western Transdanubia.

Housing price dynamic in key submarkets:

Real estate agency RE/MAX Hungary expects further growth in prices in 2024: "Stagnation/slight growth in 2023 is expected to be followed by positive growth in 2024. As the economic situation stabilizes more strongly and credit conditions improve, the dominance of the demand market may decrease and the gap between supply and demand may even out. Analysts are divided, expecting price increases of between 1% and 4% in the various property segments."

Experimental statistics reported by the Hungarian Central Statistical Office (KSH) together with the property website ingatlan.com, show that rents across the country are rising, albeit slower than in the past two years: the annual growth of the nominal rents in June 2024 was at 10.29% nationwide and at 9.84% in Budapest, approaching the respective pre-pandemic levels. The growth in rents being generally stronger than that in sales prices, gross rental yields for apartments in Hungary are also up from the previous year, averaging at 5.75% nationally and 5.39% in Budapest, according to research by the Global Property Guide conducted in March 2024.

Based on preliminary data released by KSH, the overall demand for housing in 2023 was significantly lower than in the previous year, with residential property transactions made by private persons dropping 32.3% year-on-year for second-hand housing (86,534 sales against 127,749 in 2022) and 66.6% year-on-year for new housing (3,431 sales against 10,273 in 2022).

The capital city of Budapest supplied about 23% of transactions and demonstrated the most pronounced year-on-year drop in sales among the regions (-36.9%). At the same time, throughout the year, between 30% and 40% of housing purchases in Budapest were for investment purposes, according to RE/MAX Hungary, and the agency expects to see more such transactions in the future.

The demand could potentially rebound in the upcoming periods, as the declining interest rates on new housing loans and prolonged government support in the form of subsidized mortgages returned the residential real estate lending in Hungary to a growth trajectory, according to MNB reporting. Government pressure on the banking system and easing inflation led to a decline in average interest rates on new mortgages from a peak of above 11% in January 2023 down to 6.73% in May 2024 (-1.8 p.p. since January 2024 and -3.2 p.p. since the same period last year), according to the data from the European Central Bank (ECB).

In the meantime, the outlook for housing supply in Hungary in the immediate future does not appear positive, as residential construction activity is in decline, both in terms of new deliveries and building permits, according to the KSH data. Housing completions in 2023 at 18,647 units were 9.2% down compared to the previous year and 33.9% down compared to a 2020 peak of over 28,000 new units. Dwelling permits issued throughout 2023 (21,501) were 39% down compared to the previous year. This downward trend has continued in Q1 2024.

Geographic distribution of new development in the first quarter of 2024 was dominated by the capital region of Budapest (about 33% of all new units), followed by the large regions of Transdanubia (25%), Pest (22%), and Great Plain and North (20%). Within the capital city, almost half of all new units (48%) were delivered in the 11th district.

Overall, the Hungarian economy has shifted from the recession period observed in 2022-2023 to a gradual recovery, with real GDP rising by an estimated 0.8% quarter-on-quarter in Q1 2024 after a 0.9% annual contraction in 2023. Nationwide inflation has fallen to 3.7% year-on-year in June 2024, drastically down from 20.1% a year ago in June 2023. The European Commission forecasts the recovery to continue in the next two years, projecting 2.4% real GDP growth with 4.1% annual inflation for 2024 and 3.5% real GDP growth with 3.7% annual inflation for 2025.

Along with the improving macroeconomic landscape, further developments in the country's housing market are likely to be driven by the effects of recent government measures, such as caps on mortgage interest rates, extension of VAT cuts on homes, and expansion of housing subsidies (CSOK Plus, CSOK Village).

Historic Perspective:

Housing Cycles Driven by Global Events and Domestic Reforms

After the change of political regime in 1989, Hungary faced a transformative period in the 1990s and early 2000s, including numerous fluctuations in the real estate sector and nationwide challenges such as large-scale housing privatization, establishment of the mortgage system, and government-backed credit programs. After more than a decade of reforms, Hungary became an EU member in 2004 -without full monetary integration and adopting the euro as its primary currency. It kept the country exposed to the volatility of the national currency and high inflation and eventually exacerbated the effect of the global financial crisis.

The aftermath of the 2008 global crisis was particularly devastating for the mortgage market and the construction industry in Hungary, as many transactions and development projects at the time were financed by loans based on foreign currency or state support, both brought down by the weakening forint. The decline in real house prices continued for 24 consecutive quarters resulting in about a 21% drop in nominal prices and about a 35% drop in inflation-adjusted prices between 2008 and 2013. In parallel, dwelling deliveries kept falling as well, reaching a historic low of just 7,293 new units in 2013.

The recovery began in 2014 when the new legislation introduced by the Hungarian government required financial institutions to convert outstanding foreign currency-based loans into forint. As a result, the share of foreign exchange loans in the total value of housing loan stock dropped from nearly 53% in 2013 to 0.2% in 2015 and is a marginal 0.04% as of 2023.

Another large-scale initiative launched in 2015 to help reverse the consequences of the crisis and revive the housing market was the Family Housing Allowance Program (CSOK) which offered families with children non-refundable state subsidies for buying or extending homes. The rural CSOK aimed at halting depopulation in rural areas and offered subsidies to those who wanted to buy or renovate a dwelling on a homestead or in a small settlement.

The resurgence in demand supported by the government subsidies and improved affordability of loans led to a period of considerable expansion that earned Hungary the reputation of one of EU's "hottest property markets". Construction activity rebounded, with the annual volume of new deliveries growing by an average of 30% between 2016 and 2020 to a post-crisis high of over 28,200 new units added in 2020. Prices surged by more than 240% (over 160% inflation-adjusted) between 2014 and early 2022, with double-digit increases every year, the only exception being 2020 when the onset of the COVID-19 pandemic slowed down the growth to 8.93% (5.94% inflation-adjusted).

The more recent developments show, however, that the peak of this boom has likely passed. The global shortages and rise of construction material prices, as well as the shortage of skilled manpower in the market, led to a considerable decline in construction activity since the pandemic, further exacerbated by the inflation hike and overall economic recession in 2022-2023.

In terms of prices, the market decelerated to the annual growth in nominal house prices of 12.3% in 2022 and only 5.8% in 2023, which due to high inflation translated into actual decreases of 8.5% and 1.8%, respectively. It remains to be seen how the latest government measures, such as credit sector intervention to cap interest rates and the new home-creation program CSOK Plus announced in 2023 will affect the long-term market dynamic.

20-year annual house price change (based on end-of-year MNB aggregated house price index):

20-year construction activity dynamic (authorized and completed housing units):

Data Source: KSH.

Demand Highlights:

Transactions Fall Drastically, Especially in New Housing Segment

In 2023, significantly fewer residential property transactions were registered in Hungary than a year earlier, with the market for new dwellings falling even more than for second-hand dwellings. The preliminary data released by KSH shows 86,534 sales of second-hand housing (down 32.3% year-on-year) and only 3,431 sales of new housing (down 66.6% year-on-year).

*Preliminary data. Data Source: KSH.

The macro-region of Great Plain and North was responsible for over 40% of all residential sales, while the capital city of Budapest supplied about 23% of transactions and demonstrated the most pronounced year-on-year drop in sales among the regions (36.9%).

Housing transactions by private persons, by region:

At the same time, the latest data currently published by KSH shows that in 2022 housing purchases made by foreigners in Hungary picked up, reaching 7,980 transactions and surpassing the pre-pandemic peak level of 2018 (around 7,300 transactions).

Germany accounted for more than a quarter of these sales (26.7%), followed by Slovakia (13.1%), China (10.2%), Romania (9.4%), and the UK (8.6%) among the leading countries of origin for international buyers. About one-third of foreign purchases were made in Budapest, with Borsod-Abaúj-Zemplén, Győr-Moson-Sopron, Somogy, and Zala counties accounting for another third.

According to RE/MAX Hungary reporting, the most sought-after average dwelling size in 2023 was between 40-60 sqm, nationally. In the capital city, properties between 60-80 sqm were also in demand. The average time until sale for residential properties was 4 months, with panel homes typically selling faster than brick homes.

Supply Highlights:

Both Completions and Permits Continue to Fall

As of the beginning of 2024, total housing stock in Hungary reached 4.6 million units, a 0.4% growth since the previous year. According to the 2022 Census data, of the total stock about 88% is occupied and 12% is vacant. About 21% of all dwellings are concentrated in the capital city of Budapest.

The most recent in-depth review issued by the European Commission to identify and assess the country's macroeconomic imbalances highlights the limited supply in the Hungarian housing market, which, coupled with the recently revived growth of residential lending, "could lead to a re-emergence of risks."

That view is supported by the KSH data on residential construction activity. Housing completions in 2023 (18,647 units) fell 9.2% compared to the previous year, and a staggering 33.9% compared to a 2020 peak of over 28,000 new units. The situation does not appear to be improving this year either: only 2,779 units have been delivered in Q1 2024 against 3,613 and 4,528 in the same period of 2023 and 2022, respectively.

Data Source: KSH.

Over half (51%) of new dwellings put into use in new residential buildings in Q1 2024 are in detached houses, 46% in multi-dwelling buildings, and 0.8% in residential complexes. Newly delivered dwellings were primarily built for sale (60%) and for own use (39%), with only about 1% purpose-built for lease. These proportions are largely consistent with 2022 and 2023 annual figures previously reported by KSH.

Geographic distribution of new development in Q1 2024 was traditionally dominated by the capital region of Budapest (about 33% of all new units), followed by the large regions of Transdanubia (25%), Pest (22%), and Great Plain and North (20%). At the same time, according to the KSH data, Budapest was the region with the most pronounced year-on-year decline in dwelling completions in the first three months of 2024 (down more than 35%). Within the capital city, new development has also remained uneven, with 48% of all new units delivered in the 11th district.

The outlook for housing supply in Hungary in the immediate future does not appear positive, as the number of dwellings authorized for construction has also shown a decline. 21,501 dwelling permits were issued throughout 2023, representing a 39% decline compared to the previous year. In Q1 2024, a further 9% year-on-year nationwide decline was reported, most pronounced in Budapest where just 922 dwelling permits were issued against 1,743 during the same period last year.

Data Source: KSH.

Mortgage Market:

Declining Interest Rates and Recently Renewed Growth in Residential Lending

According to the data from the European Central Bank (ECB), after peaking at above 11% in January 2023, average interest rates on new mortgages in Hungary have been on an overall downward trajectory in the last 1.5 years, most recently registering at 6.73% in May - 1.8 p.p. down since January and 3.2 p.p. down since the same period last year, however not yet reaching the pre-2022 baseline. The same dynamic was observed for mortgages of various initial rate fixation periods.

Interest rates on new housing loans by initial rate fixation (IRF):

Apart from the easing inflation, this notable decrease is largely attributed to the government pressure on the banking system pushing lenders to do more to stimulate a recovery from a year-long recession or face the prospect of higher taxes. Credit market intervention by the government resulted in the introduction of a voluntary interest cap on new mortgages below the MNB base rate. Initially set at 8.5% in October 2023, the cap was further lowered to 7.3% in January 2024. According to MNB, the overwhelming majority of housing loans in 2024 are priced by the banks below the cap.

Data Source: ECB, MNB.

When it comes to outstanding housing loans, average interest rates remained elevated at 5.79% in May 2024 against 5.19% in May 2023 and 4.70% in May 2022. The year-on-year drop was recorded only for the most market-sensitive category of loans with an original maturity of up to 1 year.

Interest rates on outstanding housing loans by original maturity:

Data Source: ECB.

The hike in interest rates in 2022-2023, coupled with the decline of households' real income and confidence amid the economic recession, led to a notable drop in the volume and value of new mortgages issued. KSH reported a total of 51,605 new loans for HUF 607.6 billion (US$ 1.7 billion) approved in 2023 against 93,600 new loans for HUF 1.2 trillion (US$ 3.2 billion) in 2022. The proportion of government-subsidized loans slightly decreased from the previous year but remained above 20%.

Home lending continued to be dominated by loans for the purchase of second-hand dwellings, accounting for 54% of the number of loans and 67% of the total amount disbursed in 2023. Simultaneously, the purchase of new dwellings represented only 9% of the number and 15% of the total amount of credit. Most housing loans issued were long-term, with the average maturity standing at 17.4 years.

Data Source: KSH.

More recently, however, the declining interest rates on new loans and prolonged government support in the form of subsidized mortgages returned residential real estate lending in Hungary to a growth trajectory, and in early 2024 banks concluded more than twice the volume of housing loans in a year-on-year comparison, MNB reported. The largest increase was observed in the amount of loans borrowed for purchasing new dwellings.

The total value of outstanding housing loans in Hungary remained relatively stable at HUF 5,003 billion (US$ 14.2 billion) by the end of 2023, only a 1.5% year-on-year increase, compared to the annual expansion of 7.5% recorded in 2022 and between 9% and 15% in the four preceding years. The ratio of housing loans to GDP continued to decline and reached 6.7%.

Data Source: KSH, Global Property Guide.

Rental Market:

Nominal Rent Growth Slows Down to Pre-Pandemic Levels

In Q1 2024, gross rental yields for apartments in Hungary averaged at 5.75%, according to research by the Global Property Guide conducted in March 2024, up from 5.09% reported a year ago in Q1 2023.

In the capital city of Budapest, yields ranged from 3.93% for 3-bedroom units in district 14 to 6.72% for 3-bedroom units in district 7, averaging 5.39% across the city. In general, smaller units (studios) and larger family apartments (3-bedroom) demonstrated better performance than 1- and 2-bedroom units.

Among the monitored regional submarkets, the highest average yield was observed in Debrecen (6.41%), followed by Pécs (5.80%), Kecskemét (5.65%), and Nyíregyháza (5.51%).

Overall, the rental market in Hungary remains limited, as the country's homeownership ratio is one of the highest in the EU at over 90%, according to Eurostat data. Only 4.2% of the population are tenants renting at market rates. The share of renting households in Budapest is notably above the national average of around 9% and was recorded at 17.5% during the 2022 Census. Both in the capital and nationwide, this indicator is up, however, from the respective 7.4% and 12.7% reported a decade ago during the 2011 Census.

Data Source: KSH, Inglatan.com.

After a sharp drop in 2020 (primarily tied to the onset of the pandemic and related travel restrictions), rents in Hungary began rapidly growing again in the second half of 2021, with the average annual rent inflation exceeding 20% during 2022.

According to experimental statistics reported by KSH together with the property website ingatlan.com, the more recent dynamic, however, shows a slowdown in rent increases. The year-on-year growth of the nominal rent index in June 2024 was recorded at 10.29% nationwide and at 9.84% in Budapest, approaching the respective pre-pandemic levels in both cases.

Within the capital city, at the end of 2023, the highest monthly rents were observed in the 1st district (HUF 300,000, on average) and the lowest monthly rents were observed in the 13th district (HUF 180,000, on average), as reported by real estate agency RE/MAX Hungary.

Average monthly rent in H1 2024 (based on home rental ads posted on ingatlan.com):

Socio-Economic Context:

Shifting From Recession to Gradual Recovery

Following the periods of post-pandemic compensatory growth, Hungary's real GDP contracted in 2023 by 0.9% in the context of high inflation and interest rates and weaker external demand. Output fell in most sectors with the notable exception of agriculture, which picked up after the severe droughts of 2022. Economic activity began to recover in Q1 2024, with GDP rising by an estimated 0.8% quarter-on-quarter. As households' purchasing power rises and financing conditions ease further, the European Commission forecast expects a gradual recovery to follow with 2.4% and 3.5% growth in 2004 and 2025, respectively.

Nationwide inflation, measured by the Consumer Price Index (CPI), has fallen from very high levels previously observed between the spring of 2022 and the fall of 2023 and was most recently recorded at 3.7% year-on-year in June 2024, drastically down from 20.1% a year ago in June 2023. The European Commission analysis attributes this ease to the fading impact of earlier energy and food price increases and dropping consumer demand. However, the recovery of consumption and strong nominal wage growth in Hungary is likely to limit the further decrease, with headline inflation projected at 4.1% in 2024 and 3.7% in 2025.

Data Source: IMF.

Hungary's general government budget deficit further deteriorated from 6.2% in 2022 to 6.7% of GDP in 2023, reflecting weaker-than-expected economic performance and expenditure overruns on interest, pensions, and public wages. In 2024, the deficit is forecast to remain elevated but decrease to 5.4% of GDP, driven by the recovering economy and by lower projected subsidies to utility companies to cover their losses from regulated energy prices. The country's gross debt ratio fell from the peak of 2020 and stood at 73.5% of GDP in 2023 - still above the European Union's target threshold of 60%. No major shifts for the indicator are projected by the European Commission in the next two years.

Data Source: KSH.

In the Hungarian labor market, the recession period manifested in companies mainly reducing working hours, instead of laying off employees, however, the unemployment rate for the population aged 15-74 still rose from 3.7% in Q1 2022 to 4.1% in Q1 2023 and 4.6% in Q1 2024, as reported by KSH.

At the same time, as the economic recovery gathers speed, the European Commission projects the market to bounce back in the near future, with working hours and real wages rising and eventually reducing the unemployment rate to 4.0% by 2025.

Overall, economically, the country remains highly integrated with its EU and non-EU partners, such as Germany, Austria, Italy, Poland, and others, making it prone to spillovers resulting from developments in their respective economies. The 2024 European Commission's in-depth review notes that Hungary's "economic policies are geared toward stimulating the recovery from the 2023 recession, but risks to government finances and the need to address them could create headwinds to growth in the medium term", while "geopolitical and trade tensions appear to pose a non-negligible risk to its economy."

Sources

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   1. Census Database: https://nepszamlalas2022.ksh.hu/
   2. Housing: https://www.ksh.hu/
   3. Housing prices, housing price index, Q2 2023: https://www.ksh.hu/
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   7. Employment and Unemployment First Releases, May 2024: https://www.ksh.hu/
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   4. Trends in Lending: https://www.mnb.hu/
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   6. Exchange Rates: https://www.mnb.hu/
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   4. Distribution of population by tenure status, type of household and income group - EU-SILC survey: https://ec.europa.eu/
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8. RE/MAX Hungary
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9. Bloomberg
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   2. EU's Hottest Property Market Shows Signs It's Past Peak: https://www.bloomberg.com/
   3. EU's Hottest Property Market Cools as 18% Key Rate Hits Lending: https://www.bloomberg.com/
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