Housing price growth driven by scarcity of new homes
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Prices on the Hungarian housing market continued to grow in the third quarter of 2017, both for new and resale homes. Growth was higher in the case of new homes, driven mainly by low construction rates in the preceding years, according to real estate listing site ingatlan.com.
According to ingatlan.com, prices of the most popular size of new homes - those of an area of 50-70 square meters - averaged HUF 673,000 per sqm in Budapest in mid-January. In other cities, prices were much lower: for example, HUF 337,000 in Győr, HUF 396,000 in Debrecen, and HUF 383,000 in Szeged, business daily Világgazdaság reported.
László Balogh, lead expert at ingatlan.com, said that the price growth of new homes is driven by a sparse supply caused by reduced construction in the preceding years, but also by rising costs due to labor shortages and price increases of construction materials. However, housing prices are not likely to grow in Budapest as much as before, at a 15-20% rate, as they are already very high compared to incomes, he added.
Average new home prices rose 7.8% in the first three quarters of 2017, while the price of resale homes increased by 7.5%, according to a summary of data published by the Central Statistical Office (KSH).
Prices for new homes have risen for almost five years in a row for new homes and for almost four years running for resale homes, national news agency MTI reported. In the third quarter of 2017 alone, new home prices were up by 3.5% and resale home prices by 2.1% compared to the second quarter.
Adjusted for changes to the composition of homes sold, prices were up 11.2% year-on-year for new homes, and were 2.8% higher for resale homes in Q1-Q3 2017.
The composition index for resale home sales shows that activity on the real estate market in smaller settlements has risen. Settlements with low home prices, where fewer sales happened earlier, now represent a higher share of the market.
In the first three quarters of last year, 95,300 homes were sold, 4% more than in the equivalent period a year earlier. The number of resale homes was 92,400, while 2,900 new homes were sold.
There were 4,100 new homes built for investment purposes in January-September, more than the actual number of new home sales. The KSH noted that few home construction projects since the 2016 boom have reached the stage of generating sales.
In the capital, resale homes sold for HUF 23.3 million on average, HUF 2.1 mln more than in 2016. The average price of resale homes in Budapest rose from HUF 361,000 to HUF 410,000 per square meter. New home prices rose 11% to HUF 26.2 mln on average.
In county seats, resale home prices were up 9.9% at HUF 23.3 mln, while new home prices climbed 14.7% to HUF 20.2 mln.
The KSH noted that as a general trend the real estate market has become more active in agglomeration areas following the economic crisis. Home prices have risen in the agglomerations of Budapest and county seats, but there is a growing price difference between central and non-central settlements and the districts of Budapest.
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