The Hungarian property market is showing signs of a rebound after a temporary slowdown as compared to the previous year. This is due to the construction industry being severely impacted by the COVID-19 pandemic on the one hand, and the collapse in international buyers on the other. The one segment that had proved to be most resilient to the negative effects of the pandemic is the luxury property market centered largely in Budapest.
According to reports, the Hungarian luxury segment which is focused mostly around the leafy parts of Budapest, shows no signs of slowing down, with demand exceeding previous years. Unusually for a European capital, the main customers for the market are local Hungarian buyers, who have no qualms about forking out astronomical sums for a well positioned high-end apartment or villa.
The most popular parts for luxury investments still prove to be the central, historic parts of the Pest side centered around the Parliament building, while on the other side of the Danube river, in Buda, the leafy hill-side parts have seen prices rising even during the financial recession brought about by the global pandemic. Although after the second wave of the virus international buyers have all but disappeared from the Hungarian market, demand had stayed steady in the form of affluent local investors.
At one of the largest real estate investments in Budapest, the ongoing redevelopment of a former hospital built in 1868 into luxury apartments in Buda’s Lipótmező district, prices range from 1.7 million, to 2.6 million Hungarian forints per square meter (1 US dollar = 295 forints, 1 euro = 350 forints). More than half of the yet to be converted apartments has already been sold, and developers expect a “full house” by the time building works finish.
Buyers in Budapest are now willing to pay over 3 million forints, or €8.350, per square meter if the apartment meets the highest standards. This still lags behind average city center prices in other major European cities such as London, where you would have to fork out nearly $16.000 per square meter, or Paris with over $14.000 per square meter in a city center apartment, but for most Hungarians, whose average salary is around €1,100 a month, these prices are well beyond their reach.
Only the real estate market near Lake Balaton was able to keep pace with the Hungarian capital, where in the largest towns, such as Siofok or Tihany, people were willing to pay over an average of 1 million forints per square meter in order to escape quarantine conditions in their inner-city apartments. The freshwater lake, that is larger in size than Lake Geneva, is traditionally a popular destination for the Hungarian working class, and lake-side apartments in the area have a huge rental potential during the summer months.
Despite the economy suffering because of the quarantine and a lack of tourists, property prices are still rising due to a shortage of available new developments. Although in Western European capitals such as London, super rich investors from the Middle East and Russia dominate the top segment, in lesser-known Budapest, local businessmen and entrepreneurs are still able to compete with foreign buyers. The Hungarian upper class is steadily growing in numbers and financial resources and are able to afford a portfolio of luxury properties.
International companies headquartered in Hungary are increasingly opting for a top management made up of local professionals whose income is slowly catching up with their Western counterparts.
It is difficult to say what the European property market would look like without the effects of the pandemic today, but according to the Eurostat survey, prices rose by 5.2 percent in the EU during the third quarter of 2020, compared with 2019. Due to the increased number of people working from home-office, there has been a trend for upscaling and a rising demand for houses in the outskirts. In an annual perspective, only two European countries have seen a fall in prices: Cyprus (1.4%) and Ireland (0.8%).