“Strong demand and supply side frictions on the housing market”

The upturn in the domestic housing market observed in previous years continued in 2017. According to the MNB’s aggregated house price index, house prices rose by 13.8 per cent on a national average, representing slightly slower growth compared to the 15.4 per cent registered in 2016. In real terms, house prices rose by 11.4 per cent in 2017. In addition to the continued increase in prices, the roughly 2 per cent rise in housing market sales transactions also demonstrates the continuing recovery on the market. Despite the strong rise, the level of house prices remains below the level justified by the macroeconomic fundamentals on a national average, i.e. there is no overheating yet. On the other hand, house prices in Budapest have already reached this level.

Hungarian housing market developments are still marked by strong regional heterogeneity, but the focus is tending to shift to an increasing degree from the capital to rural settlements. In 2017, the number of sales tended to rise in those – typically smaller – settlements, where the price level was still lower, while on the other hand in Budapest the number of transactions started to decline, due in part to the substantially increased price level (growth of 101 per cent by the end of 2017 compared to the end of 2013). The larger price increase observed in the capital resulted in a widening price gap between Budapest and rural areas: in 2017, the average square meter prices observed in villages were 25 per cent of the average prices recorded in the capital, while this ratio was 47 per cent in 2012. The annual rate of price appreciation in Budapest already shows gradual deceleration, albeit in the light of the high price level, this still represents substantial price appreciation. While in 2015 house prices in Budapest rose by 26.8 per cent, in 2016 and 2017 they were up 23.6 and 13.3 per cent, respectively.

Read more: mnb.hu