After last year’s low, the domestic new housing market has found its footing. In addition to growing supply, demand is also picking up, which may be further boosted in the long run by the new VAT refund for brownfield investments.
After a multi-year low in the first half of 2020, both investors and prospective buyers looked forward to the year due to the 5 percent housing tax (which is down to zero percent for those with young children) and new home subsidies. This optimism can also be read from the data of OTP Bank’s latest Budapest New Housing Value Map, as in the first half of 2021 a total of almost 4,200 flats were sold in Budapest, in 111 projects with more than two flats, and almost 13,000 flats are being prepared in 72 more projects, OTP wrote in a statement yesterday.
Dávid Valkó, senior analyst at OTP’s real estate firm Ingatlanpont, said that demand jumped right at the beginning of the year, and the positive trend has persisted ever since. In the first half of 2021, the number of new homes for sale on the supply side increased by 80 percent year-over-year. As for demand, while 4,700 newly built properties were sold in 2020 as a whole, 3,200 transactions were registered in the first half of 2021, an increase of 40 percent over time.
In Budapest, the upmarket 11th district leads with 15 new developments, but new condominiums are expected to be handed over in each district of the Hungarian capital this year. The list leader, with more than 2,000 flats, is the 11th district, followed by 1,800 in the 13th and 900 in the 9th district. OTP’s real estate firm expects the completion of 4,900 apartments this year.
The firm’s analysis also reveals that in addition to the areas favored by investors, it is a trend that the number and volume of investments in the periphery of the Pest side has also started to show a spectacular increase as massive projects have been launched in several districts there.
There are more and more large projects in the suburban zones as well, but the focus is traditionally and still on brownfield investments, favored by the government’s VAT policy, with most of these projects concentrated in and around the capital.
After the long-awaited announcement at the end of July, the government’s measure, which now allows customers to reclaim 5 percent VAT, could give an even bigger boost to these developments, Dávid Valkó added.
Due to the explosive rise in building material prices, the scenario considered realistic at the beginning of the year – according to which a reduction in VAT could lead to a temporary and short-term decline in prices – has now dissipated, and prices for new homes are rising steadily.
According to the OTP database, the prices per square meter of the capital city projects planned to be handed over in 2022–2023 range between HUF 500,000 and HUF 3.8 million, while the average price per square meter is close to HUF 1.1 million (€3,112) .
Title image: New blocks of apartments in Budapest. (Magyar Hírlap/László Katona)