Demand for new homes to stay high in 2022

The housing market experienced a double-digit price growth last year - around 11% in real terms in the first three quarters of the year, according to preliminary data - but this is not specific to Hungary, as price movements in this direction were common across Europe.

The rise in the price of new housing has been driven by a recovery in demand, tightening construction capacity, and a sharp rise in costs, and the the Green Home Program.

"A year ago, we could only predict demand growth with clarity, but the 2020 slowdown proved to be fleeting and the market quickly left the effects of the epidemic behind. Thus, due to the favorable conditions, the uninterrupted real price appreciation compared to the previous year's base continued last year and at the same time the turnover increased, exceeding 155,000 sales per year," said Dávid Valkó, senior analyst at OTP Ingatlanpont, describing the real estate market developments last year. 

"The coronavirus is still part of our everyday life, but the real estate market seems to have quickly recovered from the epidemic and we closed a successful year in 2021, which we can safely call the year of home creation, as the impact of government subsidies was strongly felt throughout the market. Quantifying our results last year, we can say that the number of our real estate sales exceeded the previous year by 21.5%, and our commission income is also growing steadily," summarized Balázs Hartlieb, managing director of OTP Ingatlanpont.

However, it is important to note that the base was low in 2020, which can be explained by the drop in the number of transactions due to the epidemic and the wait at the end of the year due to the home creation subsidies available from January 2021. Demand for new-build housing exploded in the wake of the Green Home Program and the associated soft loans, and the momentum has continued ever since, to the extent that supply cannot always keep pace.

Demand for new-build homes to grow even further

"During 2022, we expect the new-build market to pick up even further, and the impact of this could be felt in the second-hand market as early as this year. The role of real estate sales and credit advice in relation to state aid has clearly increased in value over the past year, as demonstrated by the fact that the value of home loans originated by OTP Pénzügyi Pont through its sales increased by more than a third last year compared to 2020. Due to the phasing out of certain subsidy elements, we expect to be able to provide effective support to home seekers in all their questions and decisions related to property purchase in the expected final phase," noted Balázs Hartlieb.

As the real estate market has grown, the credit market has also soared, with the amount of real estate loans taken out in 2021 reaching HUF 1.4 trillion. Besides state-subsidized loans, there was also strong interest in market loans.

"OTP Bank's own turnover data also confirms the growth of last year, we can say that our credit institution covered almost a third of the housing loan market, with June and July being the strongest months. OTP Bank expects that the phasing out of some elements of the home creation subsidies will lead to an increase in interest this year, and therefore OTP Bank does not expect a downturn in housing lending. A narrow segment of customers has started to demand online services, but when applying for a home loan, our customers basically continue to ask for advice in person at our branches," said Zoltán Kormos, OTP Bank's head of real estate lending.

OTP Bank has received applications for HUF 63 billion under the Green Home Program, available from October. At this rate, the HUF 200 billion budget announced at the launch of the program is expected to be exhausted in April-May. OTP experts are confident that some form of continued support for sustainability goals will be forthcoming.  

OTP Group experts agree that the outlook for the real estate market this year is good, with no significant risks identified before the end of 2022 that would certainly reverse the current positive market indicators. A further increase in sales, also due to the imminent end date of home purchase subsidies, seems clear. The rise in new home prices is also likely to have an impact on the second-hand market. At the same time, the possibility and extent of further price increases will be fundamentally influenced by the performance of the Hungarian and international economies, changes in the real wage and interest rate environment, and the current availability of subsidies.