We are here again: what will happen to the real estate market with the EUR 400 exchange rate?
We have reached a historic low, the Hungarian payer has risen by 400 forints against the euro again – and the asset does not seem to bounce back immediately. While at the beginning of March the weakening of the forint was mainly driven by the outbreak of war, today the process is much more fueled by the worse outlook for the Hungarian macroeconomic environment. We have dealt with the effects of the depreciating exchange rate once for three months now, but the issue has now become relevant again, with two variables.
What about the housing market?
Overall, the housing market is much less exposed to the forint-euro exchange rate than many would first think. The majority of the market is dominated by retail transactions and domestic players who receive their salaries in HUF and take out their home loans in HUF – the share of water loans in the total housing loan portfolio has fallen to a minimum compared to 2008, so creditors now do not have to worry about the rising exchange rate. From the domestic housing market point of view, therefore, the weakening of the forint against the euro should not disturb much water.
The housing market is disturbed only by foreign buyers in this respect, be they private individuals or small investors – mainly from the euro area, Switzerland, England, China, the United States and non-euro area countries (Romania, the Czech Republic, Poland). In the group of the latter, it was even true that their currency weakened a lot as a result of the war (so their currency did not strengthen against the forint at that time), but in the current more unique circumstances the Hungarian currency is underperforming at the regional level as well. . interested home buyers from third countries.
The phenomenon could lead to a significant increase in demand, mainly from Austria, Slovakia and Romania, where people living there are not very risky. which can also drive up prices in the agglomeration of large cities close to the border and in border villagesbut there may also be some increase in demand in Budapest (in the capital, mainly Chinese people buy apartments, while our neighbors and Germans prefer to buy in the countryside).
Commercial real estate
While companies have little influence on the euro exchange rate in the housing market, they are even more so in the commercial real estate market, where they account for their transactions primarily on the basis of the euro. In this segment of the real estate market, developers take out their project loans mainly in euros (due to cheaper interest rates), and owners and investors – who in many cases are the development companies themselves – pay their rents in euros.
In practice, this means (if we accept the current estimates) that the cost of renting an average ‘A’ category office in 1000 square meters in Budapest is 16-17 plus 6 (rent + operating costs) at a price of EUR per square meter.
it would now amount to 9 million forints, compared to only 7.1 million before the war
– although the operating costs were enough at the time. For tenants, this means a sudden significant increase in costs, while also struggling with declining energy prices (companies do not have to pay overheads). The multis present in Hungary are in a slightly better position, although they pay the wages of the employees in HUF, but they account for them in euros – these companies also have to feel that the increase in costs (it is important to add that in the life of most companies ) are a very low part of their total costs, so it will still not be possible to manage suddenly renting rents).
Of course, there are always developers and publishers on the market who give their prices in HUF – they can now gain a significant competitive advantage in the current situation (especially if the subscription remains so high for a long time).
What about real estate developers?
Both the housing market and the commercial real estate market will be affected by further increases in construction costs. The brutal rise in the price of raw materials in the construction industry was already a hit last year, and it looks like it will continue this year – eventually for other reasons.
MOST OF THE BUILDING MATERIALS ARE IMPORTED, SO THE DETERIORATING FORint EXCHANGE INCREASES ONLY
– this will ultimately be reflected in all sub-markets, ie the rise in new housing and rents.
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