May 02, 2016

Hungary's property market is booming after recouping lost ground following the 2008 global financial crisis

The central bank has reassured investors that there is no overheating of Hungary's housing market

A surge in property prices over the past two years has seen Hungary recoup lost ground after the 2008 global financial crisis, reports Reuters.

And to dispel concerns of overheating in the housing market, the Hungarian central bank has assured investors that these fears are unfounded.

Hungarian house prices jumped by a total 21 percent in the period from January 2014 to September 2015, it said in a report, compared with rises of 7.2 percent in Slovakia, 6.9 percent in the Czech Republic and 3.1 percent in Poland.

The report said Hungarian house prices had fallen more sharply after the global crisis than in other central European countries.

Tens of thousands of Hungarian households had taken out mortgages denominated in Swiss francs to take advantage of lower interest rates but suffered badly when the Swiss currency soared in value against the forint and other units.

"The dynamic growth of (Hungarian) house prices and the expansion of the volume of new housing loans are not considered to be excessive, thus the current risk level is low," the central bank said.

"However, housing market developments still need to be closely monitored, due to the frictions on the supply side, the significant increase in demand and the external factors affecting the market," it added.

NBH managing director Barnabas Virag said housing prices had approached the long-term average in the past one and a half years but said there was still room for further growth.

"The Hungarian housing market is not overheated," Virag told a news conference. "We think we won't see a very fast increase in housing prices in the coming years ... but the trend will be upwards."

While most of the increase in housing market turnover was due to used flats in the past years, the bank said, the market for newly-built housing is expected to revive as a result of recent government measures that support new loans to families and tax cuts on new home construction.

In 2007 more than 35,000 new flats were built in Hungary but this had plunged to around 7,000 by 2013. The central bank expects nearly 20,000 new flats to be built in 2017.

The revival of the housing market is already reflected in rising demand for housing loans but Virag said cuts in interest rates and rising demand were not yet fully reflected in lending conditions.

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