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August 21st, 2017

The New Apartment Market in Budapest

The upswing that began on the new apartment market in 2016 is still ongoing. According to the New Budapest Apartment Value Map created by OTP Bank, 6100 new apartments were put on offer in the first semester of this year, and as the demand seems to keep up with this rate, they project a one-third rise until the end of the year compared with 2016, with 4300 new apartments sold within six months. However, more and more investors could decide to delay going on the market due to the lower, 5 percent VAT rate that will be officially valid until the end of 2019.


Those who want to buy a new condominium in Budapest, can select from about 7700 properties, which is 1200 more than the number in January. The number of already completed apartments on sale is 260, which has never been this low.

A further 4400 apartments on the market are currently under construction, and in the case of 3000  you can already sign a final contract because the investment has a construction permit, however the implementation hasn’t started yet. The XIII. district is leading among the announced apartments on offer, as nearly 40 percent of the apartments in stock can be found here. Nevertheless, this is not surprising, as 67 out of the almost 400 investments in Budapest currently on sale, can be found at Angyalföld. 

Some developers are planning beyond the end-2019 ending deadline of the 5 percent VAT rate, however the majority of companies try to complete their current investments before then. As they would be forced to raise their prices after the rise of their tax burden, which would result in prices that the buyers are unable or unwilling to afford.

If we don’t calculate with the currently experienced lack of workforce or a surprise event, the construction of a 100-150 apartment block takes at least one and a half years. If we include the planning, licencing, and a possible land purchase, if the project kicks off now, it is unlikely that it will be completed by the end of 2019.

In the first semester of this year, the data base of OTP Bank registered the sale of 4300 new apartments, which is a reason to be optimistic. This number is two-thirds of the market sales of the entire year in 2016, which can mean a one-third expansion in the market compared with last year. Should a similar rate of development continue next year, then we could say that the new apartment-market of Budapest had returned to the level of the period before the financial crisis.

As in the offer, so does the XIII. district leads in the demand; 1300 apartments were sold in six months, the same amount as during the entire year in 2016, meaning the doubling of the demand. The XI. district came second with 700 apartments, which is followed by the VIII. and IX. districts with 330 properties each.

The remarkable rise in demand is only followed by the offer with the delay of about a year, counting the completed new apartments.

The OTP Budapest New Apartment Value Map predicts a 70 percent rise in the construction of block of flats in Budapest. Dávid Valkó says that “according to our data, 3200 block of flats were built in the capital in 2016, we expect about 5500 to be completed this year. Apart from this, we already have information about nine thousand further apartments with a finishing deadline of 2018, and another four thousand with a 2019 deadline in our data base – a third of which have already found an owner. Among these, several will have their completion date delayed, a number which is likely to rise with the announcement of further new projects.” Valkó adds, that based on all these, a previous estimation of OTP could come true, that predicted the completion of 25 thousand new apartments in 2018, including family houses. A favourite location in the construction index is the XIII. district, with 1400 new apartments expected to be built this year, with a further 2500 announced for the next year. The XIV. district comes second in 2017, with 900 apartments, and the XI. is the third with 640 real estates.

The prices in the past more than one and a half years had been rising steeply, which is bad news for the apartment buyers. While in 2015 the average price in Budapest was at around 450 thousand Forints per square meters, last year this had reach the 500 thousand limit. The average price of the investments completed this year could be 560 thousand Forints, possibly rising to six hundred thousand next year.

It is difficult to predict how long the current new apartment boom is going to last, as apartment builders are trying to rapidly utilize the lower VAT rates, which could signify a definite expansion in the offer until 2019. The competition is becoming more intense at the same time. The number of projects that are completed after their deadline is rising, and the sale of several small- and mid-sized investments had ceased in the first six months. The more intense competition, the rising costs and the delayed construction permits could all contribute to discourage the investors to begin a new project, along with to looming completion deadline of late 2019.




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