In 2023, the demand for real estate in Hungary fell greatly and the market virtually froze. How is the situation now, what has changed and in what direction? Eugenia Konkoy, head of Zsenya-Building Kft, shared with us the latest news on the Hungarian housing market. 

Latest Changes in the Hungarian Real Estate Market

— Evgenia, in our interview last year, we discussed the government support program for large families when purchasing housing. You mentioned that it was about to undergo changes, in anticipation of which the entire market froze. Please tell us how this program was ultimately transformed and how it affected the market?
 

Евгения Конкой, руководитель компании Zsenya-Building Kft—  Yes, from January 1, 2024, the social support program was significantly reformed. Previously, large families received a gratuitous payment of 15 million forints (~$41,360) for the purchase or construction of housing upon the birth of a third child. In addition to this amount, it was possible to take out a loan. After such a purchase, the property could not be sold for 5 years.

Now there is no such direct financial support. Instead, a preferential mortgage lending scheme has been introduced at a maximum of 3% per annum (maybe less). It is available to families who are planning to have children within 10 years. At the birth of the first child, 5 million forints ($13,800) will be written off from the loan; for the second child — 10 million, the third — another 10 million. That is, only 50 million forints can be written off from this loan, subject to the birth of four babies. But you need to understand that before they are born, you need to repay the loan yourself.

It turns out that those who already have children have dropped out of the state support program altogether. Only if, for example, a family has two children and they will give birth to as many more, then they will be able to get a loan from which they will write off 10 million forints for each of the two youngest children.

However, there is one more nuance that greatly limits families — very high income requirements. To obtain a loan of 50 million forints, you need a salary of at least 1.2 million forints per month, which is equivalent to 3500–4000 euros. There are practically no such high incomes in Hungary. Therefore, ordinary families with an income of 600–1000 euros do not meet the banks’ criteria.

Because of this, the market is not moving anywhere, and people with insufficient income for such a loan are left with no options other than renting or buying a home in Hungary using savings and help from relatives.

— What is the other news about the Hungarian real estate market?

— Another important news item: from June 1, 2024, a new program for the repair and reconstruction of residential buildings will start in Hungary. This means that from this date, owners of houses and apartments built before 1991 will be able to receive a loan of up to 7 million forints ($19,300) for renovations.

What is the point: you need to submit to the bank your calculations, according to which the planned changes (replacing windows, doors, insulating the house, etc.) will lead to savings in energy consumption at home by at least 30%. The bonus for the residents themselves will be in the form of lower heating bills that will need to be paid as a result of such changes.

To participate, you will need to contribute 1 million forints of your own funds. Then it will be possible to take out a loan, from which 2-3 million forints will be written off after the repairs have been carried out and this energy efficiency has been achieved.

But again, to obtain such a loan, you need a fairly high income. Banks are unlikely to approve participation in the program for people with average salaries.

The salaries of local residents have literally depreciated.

The Current State of the Hungarian Market

— How are things going in general with activity and purchasing power in the market?

— Unfortunately, the situation hasn’t practically changed since last year — the market is still remaining frozen.

The most popular housing format now is apartments of 50–60 square meters on the secondary market, since they are cheaper. As for new buildings, many of them have been frozen since last year. We see especially many such projects in the 13th district of Budapest. Many developers are declaring bankruptcy.

The fact is that in 2022, the demand for new buildings was very high; they were immediately dismantled even at the “pit” stage. On this wave, many developers took out loans and began building projects. But this was before the sanctions, that is, during a period of cheaper building materials and decent wages.

Now the salaries of local residents have literally depreciated: 350–400 thousand forints (€900–€1030) is very little compared to the prices of food and utilities. For example, 1 kg of bread now costs 3 euros, although previously it could be bought for 0.5 euros.

To talk about the cost of a communal apartment, let’s take, for example, a house of 100 sq.m. If previously a family living in such a house paid about 50 euros for electricity, now it is already 100 euros. Prices for gas have increased by 5–6 times — instead of the previous 80–100 euros, for gas in such a home, the payment will now be 300–350 euros per month.

That’s why people aren’t thinking about buying an apartment now—for now, they’re just talking about how to live on the available funds.

Budapest view

— How are things going with residential real estate prices?

— Prices have remained virtually unchanged. Developers who built houses at the peak of high prices for building materials simply cannot afford to reduce the cost of apartments. This will be unprofitable for them.

In Eger, the price per square meter remains at 2050–2080 euros. In Budapest, a square meter costs between 2200 and 3200 euros, depending on the area. That is, all figures remain at the same level as last year.

At the same time, German investors continue to demonstrate high demand. They remain one of the most active in the market.

— What taxes await real estate buyers in Hungary when purchasing and owning a property?

— Until 2026, when purchasing a new apartment or house, the VAT rate is 5%. But then it will grow to 27%.

After purchase, homeowners pay a utility tax every three months. Its amount depends on the locality, but on average, it is 10 euros.

—  What about the rental market? Are there any changes there?

— Rental rates in Budapest have decreased. If previously a two- or three-room apartment in a prestigious area was rented for 700–800 euros, now you can find options for 500–600 euros per month. 

— What are your forecasts regarding the further development of the situation in the Hungarian housing market?

— Now everyone is waiting for two important political events. The first is the parliamentary elections in Hungary on June 9th, and the second is the US presidential elections in November. Depending on their outcome, certain changes in the market may follow.

Also, a lot depends on the development of the conflict in Ukraine as well as anti-Russian sanctions; their deepening or, conversely, partial lifting can also significantly affect the economic situation in Hungary and, accordingly, the real estate market.

Therefore, it is difficult to make any specific forecasts at the moment, but, of course, everyone hopes for the best.