August 9th, 2011
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Residential property deals in Hungary down 10% in July compared to 2010

In July, 6,250 residential real estate transactions took place in Hungary, fewer than in the previous two months, Duna House wrote in its latest analysis. Among reasons for the decline, the real estate agency mentioned seasonality and the high Swiss franc exchange rate. The number of transactions was also 10% lower than in the same period one year ago.

Compared to June, prices of panel flats declined in all regions except for Western Hungary, where they increased by 17%. The drop was 10% in Eastern Hungary and close to 10% in Budapest.

As for apartments in brick buildings, average prices increased by 4% in Budapest’s inner districts (V, VI, VII). In all other areas examined, prices declined, though the rate was lower than in case of panel flats. [penzcentrum.hu]

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  • Canadian

    Another month and another decline is home prices.

    Everyone who is invested in Hungarian RE market should look to the US/Ireland/Spain RE market collapses and see whats in store.

    It will get much much worse.

    People who are selling need to get realistic in pricing expectations, every month that goes on, inventory continues to build while sales slow.

    The scary part is that banks have yet to start to foreclose on anything but a handful of homes.

    When banks start to foreclose on everthing– about 1-1.5 years, then wait for the price drops.

    Either sell your property right now for whatever you can as it will be worth less every month going forward for the next 3-4 years or get ready to hold on to the property for the next 6-7 years at least.

  • American in Budapest

    To the contrary, it is the best time to be in real estate. The idea is to buy cheap, not dear.

    And you can create value by doing first rate renovations.

  • Canadian

    @American, these prices have at least 30% more to drop. One thing is certain, prices are not going up anytime soon.

    whats the urgency to buy real estate right now. More inventory comes online every week, sales slow down every week.

    Renovations do not return more then 50% of cost, and that is in good times and an up market.

    Location is what brings value, buy the smallest property on the best street you can afford.

  • Ian

    Buy the smallest property on the best street and become a mole in a hole. Sounds good…let the sun shine in and keep the winter out…
    American in Ingatlan is nearer the mark and offers good advice – fill your boots whilst the going is good and prices are low….

  • Canadian

    Like i said, if you think this is cheap, then just wait a few years. People who purchased in the US in 2007 and 2008 thought property was cheap, only to see the values drop even more. Same story with Ireland and Spain.

    Hungary has a very serious lending problem, tough to get a mortgagae in HUF and either way, current average wages do not support current valuations.

    The rule or average should be 3-4 times annual income for the average home. Prices have to drop to a level were there is local support for pricing, not there yet by a longshot.

    I know everyone thinks it cant happen here, because they are invested in the market and let hope blind them from the true reality. People in the US never thought it could happen there, nor did people in Ireland.

  • Logical

    I follow your logic based on other countries…this is Hungary….come to certain parts of Lake Balaton and see the fabulous homes belonging to the clerks in Budapest. Strange how taxpayer’s money can find its way into totally unrelated real estate….???

  • Canadian

    @logical– I understand the graft and corruption problems in Hungary, but they cannot shift a market.

    Look at the simple facts.

    Demographics– 10 million people in the country, aging population, as more people die, more property comes onto the market, even in a stable market, this would have a hard time being absorbed. How many of the 10 million are full time workers earning a wage? 3-4million?

    Homeownership– Something like 80% of familes own a home in Hungary, its amongst the highest home owning ratio’s in the world. Well, the 20% that dont own, either can;t because of age or disability, credit or dont ever want too. who is left to sell too?

    Lending– the silly govt laws outlawing foreclosures for lenders means that they will not lend but to only the best qualified buyers with substanial downpayments, these are few and far between

    Austerity- Hungary is just in the 2nd year of an austerity package– employment is less secure.

    No more foreigners buying– all the easy credit worldwide made its way into the RE market, artifically inflating prices and the locals brought the fallicy that “house prices always go up”.

    Look at the volatility of CHF, hitting 260 HUF and climbing, 3-4 months of that and the property market will take an almost 20% hit in valuations.

    Check out this article
    http://247wallst.com/2011/08/09/the-ten-housing-markets-that-will-collapse-this-year/

    look at the those cities and home prices and average wages.

  • logical

    Canadian. There is a mountain of new information coming into play each day as to the state of the world economy.
    France is now under pressure on its credit rating and the FTSE and DAX have taken huge hits in the past 4 days alone.
    I believe owning property is the best safe haven for your cash and, more importantly, having a roof over your head!
    People need houses/flats and rental suits a few but the majority want to own their own castle.
    The ageing population bit applies the world over and not just to Hungary.
    And, most individuals want to improve their lot by moving to bigger and better property when they can. So there is always potential for a lively housing market when the economic climate improves.
    If you wish to continually talk down the market in Hungary that’s your prerogative.
    Obviously you have an ulterior motive for doing that?

  • Canadian

    Logical. The same arguements I make can be said of the Canadian RE market as well, as we are primed for a market decline here as well.

    Nothing wrong with owning propety, BUT, its one thing to buy shelter and another all together to get into the speculative market and buy “investment property”. The latter is what I belive led to the real estate market downturns in the US/Ireland/Spain/Hungary etc.. On the ride up its all good, but on the ride down, not so much.

    I witnessed the US housing market implode first hand, travelled to the US often and have many friends there. What happened to those folks is not something I wish upon anyone. Total wipeout a lifetime of savings and equity.

    And I saw the exact same thing there, governments, real estate marketing companies talking up the market etc… just like i do in Hungary. Im not trying to talk down the market, just being brutally honest. For some people, its better to sell while they can because prices are only going lower, that i am sure off.

    I have no motive to talk down the market, im not buying any real estate in Hungary, weither or not prices go up or down 20% is inmaterial too me.

    Im just pointing out the facts. The facts cannot be disputed. Im sorry if that goes against what many people who own RE in Hungary would like, but it is what it is.

    The market has to be purged, the sooner it happens the sooner it will turn around.

  • American in Budapest

    Hi Canadian,

    I bought a 110 square meter apartment in a fully renovated 19th century building for 20 million Forints and the renovation cost 15 million.

    The appraisor estimates it to be worth 45 million Forints.

    I have not seen a renovated apartment in Budapest that matches the quality of my renovation.

  • Canadian

    @ American , Sounds like an awesome party pad!

    Let me guess, you were an all cash buyer.

    110 sq m is a huge place by Hungarian standards, and 15million HUF is a monster sum for most native Hungarians to spend on a renovation.

    No doubt that it is a beautiful place. Im sure you could sell it for a nice profit but there are fewer buyers at the price point.

    Sounds to me like it was a long term buy for you, or else you wouldnt have spent 15 million HUF on a reno.

    If you dont mind me asking, what are the condo/strata/maint fees on your condo?

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