Unsurprisingly, readily available bank loans prior to the subprime mortgage crisis of 2008 allowed not only widespread business investments and foreign currency mortgages for households, but also extravagant residential purchases. These assets are typically located in a few wealthy districts of Budapest and the surrounding suburban areas that became a popular destination for families fed up with city life.
“Because of the higher property value those moving to the suburbs took out bigger loans and in the case of a foreign currency-based policy, a unit of change in the forint exchange rate meant a bigger increase in their installments as well as their overall debt,” said Kata Kühne, managing director of the Otthon Centrum.
OC cites data from the financial market regulator PSzÁF that shows 14% of defaulted real estate assets are concentrated in Pest County.
“This unfortunately adversely affects the residential property market, since high debts also narrow the sellers’ room for maneuver, which adds to the surrounding area being even frostier than the capital,” Kühne said.
Consequently, demand for high-end property in suburbia has also dropped. Barely 5% of any interest is targeted at assets worth HUF 50 million or more, and only every fourth prospective customer shows any interest in houses valued at HUF 30 mln or more.
Demand in general for the areas surrounding Budapest is set to deteriorate given the dropping number of people moving out of Budapest, as evidenced by figures from the central statistics office.
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