Strong demand, rising prices, moderate supply on housing market
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Home prices in Hungary continued to increase in the second quarter, with price rises accelerating the most in cities outside of the capital but home prices also rose in Budapest after a year of stagnation, according to the National Bank of Hungary's (MNB) latest Home Market Report published on Wednesday.
The price gap between Budapest and other major cities narrowed in 2021, MNB said.
As a nationwide average, home prices were up 13.3% in Q2. Home prices in cities outside of the capital rose 18.2% while home prices in Budapest increased 9.1%. Price rises in smaller communities slowed to 7.3%.
The supply side of the housing market is hindered by the general rise in raw material prices and a shortage of raw materials, MNB noted. The temporary reintroduction of the preferential VAT rate on home construction gave a boost to the market but further measures are required to stimulate supply in a sustainable way, MNB said.
The National Bank of Hungary launched its FGS Green Home Program in October, shifting demand towards environmentally sustainable new housing, also encouraging builders to develop "green" homes.
Lenders signed housing loan contracts worth HUF 364 billion with consumers in Q2, up 81% from a year earlier, thanks to the new home purchase subsidies available from 2021. Demand for credit is expected to strengthen further in the second half of 2021.
The number of new homes completed in January-September 2021 was down 1.7% from a year earlier. Due to home completions originally planned for 2020 but postponed to 2021, this number fell by 27.3% in cities outside the capital.
MNB estimates that more environmentally sustainable new homes are about 3.5% more expensive but the higher price could be recouped in the long run due to more efficient maintenance and greater value stability and the interest rate advantage provided by the FGS Green Home Program may offset the higher price.
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