Real estate market falls in Hungary. Romania may follow

The real estate market in Hungary saw two critical points during the past few years, just as Romania did: the accession to the European Union and an interior economic crisis. One year before and one year after the accession to the EU, the price for real estate properties kept growing. After two years, the growth ceased, but the investments in commercial spaces were booming.

In brief:

– The real estate market crisis in Hungary came in 2007, when the Government imposed anti-inflation measures;

– The market is divided between Eastern and Western Hungary. In East, near the Romanian border, the prices doubled because of Romanians massively buying cheap homes.

Just before Hungary’s accession to the EU in 2004, the rice for a built square meter in Budapest reached 3,200 euro. Two years after the accession, the price fell between 1,000 and 1,700 euro. „What happens now in Romania is what happened in Hungary last year. Everyone wonders where will the prices go. Everyone speaks about a price drop, but the situation is not as dramatic as it sounds: the prices decrease, but not that much”, says Horváth László, real estate market analyst for Ingatlan.net, the Hungarian real estate portal.

According to Hungarian experts, 2005 – 2006 was an abeyance period, when the main growth was seen in the commercial space market. In 2005 and 2006, the total surface of commercial spaces doubled in Hungary, investments reaching 20 billion euro.

In 2007, the real estate market decreased, after the Government decided to take severe measures against the inflation – which reached 9% – the steps taken into the process including rougher conditions for real estate credits.

According to Nicholas Leigh-Wood, manager of the Midas European Property UK-based real estate agency, over 21,000 apartments were for sale in Budapest in 2007, out of which 30% remained unsold at the end of the year. Still, 95% of Hungarians own a home, this being largest percentage in Europe.

At this moment, a one-room apartment in Budapest costs one third of its equivalent in Bucharest, as most properties do, after prices in Budapest fell only 0.5%, compared to last month.