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This can be the best time in history to invest in real estate in Hungary - Property Investment Forum 2016

Jan 5th, 2017
Invest in real estate in Hungary

 The office real estate market is poised to deliver another solid performance as we enter 2017  – was argued at the Portfolio Property Investment Forum 2016, the most important event of the Hungarian real estate market.Demand for office property in Budapest is at its strongest for a decade with a steady level of transactions holding prices firm and rents on the rise, with capital values in the city since the market returned to growth in 2014 tempting investors back into the market.

The whole Hungarian office sector is managing well at European level

  • Improvements can be observed in all aspects of the market:  the vacancy rate, which has slightly increased; rents are pressed to increase, the economic and market fundamentals are convincing, so the previous limits do not hinder investors any more.
  • Growth of the capital value and rents are expected to rise and Hungary is ahead of several developed and emerging markets. (RICS Trade and Real Estate Monitor)
  • Considering the interest premium of the development loans, Hungary is not counted to be riskier than the Czech Republic or Poland.
  • Bankswillingness to finance real estate loans has increased. Banks prefer to finance office developments, and refer residential building to retail trade estates. (KPMG survey)
  • The international environment has become more precarious, which played a crucial role in the improvement of the image of Hungary. In this situation concerns for the Hungarian politics do not seem considerable.

Arising questions

  • Although the proportion of well performing loans is increasing in the region (64%), it is still less than the western European average (90%).
  • International investors are attracted mainly by high yields. If these show a significant fall; many foreign businesses may be dissuaded from seeking to invest here.
  • Brexit can have a positive effect on the property market in the region; however, Parliamentary approval needed for Brexit is still ahead.
  • The biggest challenge of the construction industry is the skilled and loyal human resource of construction workers to carry out the developments.
  • Residential real estate isn't in a speculative bubble. Instead, short term rentals in the downtown of Budapest are driving prices higher.
  • Compared to pre-crisis period banks have tightened their lending standards, even with some non-negotiable conditions.
  • The rate of yield of premium office complexes may be reduced to 6 % by the end of 2017, but it needs to be examined in the light of liquidity and risk.

Despite decreasing yield, office market tend to be characterized by investor optimism

The effects of the upgrading of credit rating agencies had already been priced by the end of 2015 and at the beginning of 2016 transactions were started by the investors; therefore this year can be the second strongest year in the history of the real estate market in Hungary.

  • In case of office rents, prices are growing owing to demand-supply imbalance, but this correction is similar to the price correction in the residential property market.
  • Beside private companies public developments will also appear in the office market. The proportion of the state and private sector is still a question.
  • Constructors and designers need to consider the impact of mobile technology, the millennial (Gen Y) employees' demand for choice over the type and location of their work, and especially the implications of culture on workplace design.
  • Good location is decided by the tenants; hence, for instance both a site called Tópark in the outskirts and a downtown location can be attractive for different companies.  

Construction and real estate business fundings

  • Banks welcome growing investments and developments enhanced by loan programs.
  • Banks can choose from a wider range of projects, and they want to decide on the best, the most promising developments.  There is an increasing competition for favourable projects.
  • Duna House Holding entered the Budapest Stock Exchange, thinking that both funding forms is needed and banks prefer financing a company which is also on the Stock market.
  • Hungarian property developer Wing Group launched a €40 million corporate bond package, listing the bonds on the Budapest Stock Exchange. To achieve this, a big company and adequate staff are both needed.
  • “Owing to several factors  such as the current excess of liquidity, capital finding its place and banks lending even in case of lower interest premium - the success of 2016 looks set to continue in 2017 ” – was also pointed out at the real estate event of the year.


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