A recent study by Otthon Centrum on the Residential Property Market in Budapest (OC Lakaspiaci Monitor) reveals 4 proposed impact factors which could initiate an increase in apartment construction.

1) Improved consumer expectation of households
2) Increase in wages
3) Affordable loans
4) 5% VAT (down from 25%) on newly-built apartments

Between January 2010 and January 2011 the number of unsold new apartments in Budapest has been 3200 units (down from 3800).

There are roughly 2000 new apartments to be handed over this year in the capital. 500 of these are being built in District 11 (Buda), 300 in District 14 (Zuglo, Pest), and 180 in District 12 (Diplomat District, Buda), just to name some of the most popular residential districts.

There is much uncertainty regarding the second-hand market, for it is difficult to judge how many foreclosed properties will enter the market as soon as the government freeze on evictions is lifted on July 1, 2011. There is a pressure on the banks to get rid of their bad loans in order to bring more activity to the mortgage market.

Read 90,000 Households in Default http://ceinvest.hu/2011/04/90000-households-in-default/

How has the Recession Impacted Property Prices?

The average prices of used apartments have changed in varying degree since Q1 2007, until today, influenced by apartment type, and location.

Budapest regular apartments dropped 6.67% from 300,000 HUF (1120 EUR) to 280,000 HUF (1050 EUR)/m2.
Budapest “panel” apartments dropped 10% from 200,000 HUF (750 EUR) to 180,000 HUF (670 EUR)/m2.
Country regular apartments dropped 5.26% from 190,000 HUF (710 EUR) to 180,000 HUF (670 EUR)/m2.
Country “panel” apartments dropped 18.75% from 160,000 HUF (600 EUR) to 130,000 HUF (490 EUR)/m2.

Please note these are AVERAGE prices throughout the entire city of Budapest, a city of over 2 million, including mass housing projects of outer districts, low income neighborhoods, as well as industrial areas. Many of the housing estates were built before the 70′s, very similar to the so-called panel blocks. By “panel” we mean the grey “Communist-style” pre-fab blocks of flats built mainly in the housing boom of the 70′s, so common in Eastern Europe, which suffer from poor construction, insulation defects, and awkward layouts. Property in the country is also averaged, including former industrial towns of Eastern Hungary most hit by unemployment. The numbers only refer to apartments/flats, not detached houses or other property.

Andras Patkai

www.ceinvest.hu