House prices in Hungary have reached a new record in 2021. In Q4 2021, the biggest jump occurred in secondary cities compared to the last quarter of 2020 (25% year-on-year) followed by Budapest (11% year-on-year), the National Bank of Hungary (MNB) reports.
In its latest Housing Report, the central bank underlined that house prices had gone up a 25.3% year-on-year in Q1 2022 due to the hefty demand which was fueled by rising inflation and increasing costs of mortgage loans. The market is largely overvalued, the central bank warned.
The total number of transactions was 168,000 in 2021 which is a 15.6% increase compared to the previous year. This activity was backed by the government which provided several special financial ease to certain groups of the population. Meanwhile, commercial banks have been tightening their conditions for both individuals and companies. All are increasing interest rates as the MNB sharply increased the base rate in April 2022. Financial institutions expect a significant drop in demand for project loans and individual mortgages in Q2 and Q3 2022.
The new supply will be weak as developers are not keen on starting big projects. The break is backed by high construction costs and labour shortages. Sky-high energy prices and the growing problems with the supply chain are also against any kind of huge investment, says the MNB report.
