The Future of the Housing Market
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The pace of housing construction in Budapest has increased in recent years, but it still cannot keep up with the demand for housing. As a result, housing prices are constantly rising.
In 2023: Approximately 14,000 new apartments were built in Budapest, a 10% increase compared to 2022. The pace of housing construction is the highest in the inner districts, but it is also increasing in the outer districts.
The pace of housing construction is influenced by the following factors:
The demand for housing.
The availability of building plots for housing construction.
The price of building materials.
The shortage of labor.
Increasing the pace of housing construction is key to stabilizing the Budapest housing market and curbing the rise in housing prices.
The Budapest housing market has experienced a significant price increase in recent years, and the average square meter price reached 1 million HUF in 2023. This trend is due to several factors, including:
Increased demand from the population: The growth of the Hungarian economy and rising incomes have led to an increase in demand for housing from the population.
Limited supply: There is a shortage of vacant building plots in Budapest, and the pace of housing construction cannot keep up with the growth in demand.
Low interest rates: The central bank base rate is at a low level, which makes it cheaper to buy a home with a loan.
The average square meter price of 1 million HUF is an average value, and the price of an apartment depends on several factors, such as the location, size, condition, and equipment of the apartment. However, even this average price shows how expensive the Budapest housing market has become in recent years.
There is a lot of uncertainty about the future of the housing market. The central bank’s interest rate hikes are expected to slow the rise in housing prices, but demand is likely to remain high. The increase in the pace of housing construction could alleviate supply tensions, but this is a long-term solution.
The following trends are expected to shape the future of the housing market in the coming years:
The growth in housing prices will slow down, but they will continue to rise.
The demand for housing will remain high.
Supply tensions will ease, but will still persist.
Homebuyers will increasingly look for apartments in cheaper districts further away from the city center.
The role of the rental market will increase.
The phenomenon of significant price increases can lead to the formation of a housing bubble.
A housing bubble occurs when housing prices are driven by speculation rather than real demand. This means that investors buy apartments to sell them at a higher price in the future, not to live in them. The bubble grows until speculators start selling their apartments, at which point prices start to plummet.
A housing bubble can have several negative consequences:
It makes it difficult for homebuyers to access housing.
It can cause losses for homeowners.
It can cause financial instability.
Several factors indicate that a bubble may have formed in the Budapest housing market:
Housing prices are rising rapidly.
A large proportion of homebuyers buy apartments with a loan.
The demand for housing exceeds the supply.
At the same time, the Hungarian government supports homebuyers with low interest rates and family benefits, although according to data, this family policy has not led to a significant increase in the population.
In Hungary, there is a close correlation between the average salary and the price per square meter of housing. This means that the higher the average salary in a given settlement, the more expensive the housing. This is because the price of housing is determined by the purchasing power of the population.
The average gross salary in Budapest in 2023 was 576,000 HUF. The average apartment price in Budapest in 2023 was 1,000,000 HUF. This means that the average price of an apartment in Budapest can be purchased in 1.74 years from an average Budapest salary.
The correlation between the average salary and the price per square meter of housing shows that buying a home is becoming increasingly difficult in Hungary. Housing prices are rising faster than average wages, which means that housing is becoming less and less affordable for the population.
The information is based on data available in December 2023. The average salary and the price per square meter of housing may change in the future.