In the second half of 2021, house prices continued to grow at a faster pace. According to the MNB’s housing price index, the varnish rose to 7.2 and 2.4 in the third and fourth quarters of the national average, respectively. The annual growth rate of housing has thus accelerated, rising from 14.4 per cent in the second quarter to 21.4 per cent in the fourth quarter.
The last example of such a dynamic price increase was in 2003 in Hungary.
According to the Central Office’s housing price indices, 20.2 for new housing statistics in 2021 is constant, while second-hand housing has risen from 20.6. According to the MNB’s housing price index, house prices rose by 13.4% year-on-year in real terms in the fourth quarter of 2021, which is significantly higher than the 8.7 per cent annual rise in the second quarter of 2021.
The annual dynamics measured in real terms is no longer outstanding compared to previous years. House prices rose by a total of 141.4% in real terms by the end of 2021 compared to their current low in the fourth quarter of 2013. The pace of price increases in rural cities charges, but in Budapest the dynamics also accelerated. The accelerating rise in housing prices in 2021 can be attributed primarily to rural settlements.
This is a novelty compared to previous years, as in the first years of the current price increase, the price increase in Budapest far surpassed the rest of the country, but now, in addition to the slowdown in the capital, the price increase in rural cities has accelerated.
In Budapest, the annual nominal growth rate of house prices rose from 9.7 percent in the second quarter of 2021 to 11.3 percent in the fourth quarter. Meanwhile, the annual growth rate of house prices in rural towns and villages accelerated from 18.7 per cent to 25.0 per cent and from 9.7 per cent to 22.3 per cent, respectively. In real terms, 3.9 total residential properties in Budapest in the fourth quarter, which is slightly higher than in the middle of 2021. In contrast, in rural cities, the annual rate of increase adjusted for the consumer price index increased from 12.9 per cent in the second quarter of 2021 to 16.8 per cent in the fourth quarter, and rose from 4.3 per cent to 14.2 per cent in municipalities.
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In 2021, the largest residential properties in the cities of the Central Hungarian region became more expensive. Examining the change in urban house prices Similar price dynamics can be observed in most of the region of Hungary. The rate of annual price increase varied between 19.1 and 25.6 percent in the fourth quarter of 2021 among most regions of the country. In 2021, an exceptionally high price increase of 36.9 percent was measured in 2021, despite the low processing of regional data located in the cities of Central Hungary around the capital. With this rise in price
House prices in the cities of Central Hungary are almost as high as in 2008 (+ 163.5 per cent) as in Budapest (+167.2 per cent).
Based on the transaction data of real estate agents, house prices continued to grow at an extraordinary pace in the first quarter of 2022. According to the MNB’s preliminary housing price index based on real estate data, residential real estate prices rose in the first quarter of 2022. On a national average, nominal prices were measured at 10 per cent on a quarterly basis and in Budapest at 9.5 per cent. Thus, according to preliminary data, the annual nominal growth rate of house prices rose to 25.5 per cent in the first quarter, which is the general value in the housing market cycle since 2014, and in Budapest it could reach 19.5 per cent, which again means an outstanding rise in prices.
What is the overvaluation?
It can be clearly seen from the above figure that, according to the MNB’s analysis, the variance in varnish levels, once justified by the fundamentals, has again exceeded the capital level in the capital after more than a decade. rise at a rate. like the people of Budapest. In the past, the rise in the price of the capital was higher, so we can now witness a kind of catching up of rural prices. On the other hand, there is no doubt that housing is now overvalued both in the capital and in smaller settlements across the country.
In 2021, based on sales and purchases at county seats in Hungary, the average price per square meter was HUF 377,000, which is 53.2 percent of the average price of HUF 709,000 per square meter in Budapest. The difference between Budapest and rural house prices is now narrowing due to the higher price increase in rural areas. In 2020, the average price per square meter of county seats was 48.8 percent of the average in Budapest. In the rural settlement, catching up per square meter was also visible in the other capitals, but their extent was better. Within Budapest, the differences also decreased, the average prices per square meter increased more in the outer districts compared to the inner districts. The ratio of house prices to incomes has risen again in most major cities.
In 2021, after a halt in 2020, the average price per square meter in all regional centers of the country rose again more than average earnings.
Is a price drop expected?
The MNB also shows that retail net financial assets have been rising steadily since 2009, although there has been a slight decline since Covid. Real incomes have also risen steadily since 2013, with a quarter approaching 10 percent.
Thus, the development of household income and the volume of savings do not in themselves justify a decrease in prices. A recent analysis of the overseas housing market also points out that the level of employment in the housing market has turned out to be better than the development of interest rates. If we look at this, we can also see that the unemployment rate in Hungary has been steadily declining and employment has been rising since 2013. just think of how many sectors there are where the expansion of companies is hampered by persistent labor shortages.
While the national unemployment rate was around 11 percent between 2010 and 2013, by 2019 it had fallen to 3-4 percent. At the same time, employment rose from 50 per cent to 63 per cent, and the long-term unemployment rate, ie more than a year ago, fell from a 5 per cent to a negligible 1 per cent.
Therefore, a sudden decrease in the varnish is not justified, so it should be noted that the economic environment is also changing. Inflation and interest rate hikes make it more difficult to pass on housing purchases (including housing developments, but we will discuss this in a later article), and the amount of family benefits available is also declining compared to house prices. The current numbers are not a cause for concern even here, it is only worse than the “golden age” between 2015-2019, when literally anything could be bought in the domestic housing market, as we had to go. Gone is now, which may also have an impact on demand, but overall, the current developments alone do not yet lead to a decline in the nominal value of house prices.
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