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Impact of economic recovery on commercial property sector muted

Analysis

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The sustained effect of the pandemic on tourism, the rise in the number of people working remotely and the expansion of e-commerce have tempered the impact of the economic recovery on Hungary's commercial property sector, according to a biannual report by the National Bank of Hungary (MNB) published on Thursday.

Demand for office space remains low, and the vacancy rate is expected to grow as handovers take place, according to the report. 

The vacancy rate in the office space market edged down to 9.1% in Q3 from 9.8% in Q2, as there were no handovers, but the rate is expected to be "around 10%" in the coming quarters, still well under the vacancy rate of over 20% during the 2008 global financial and economic crisis, Tamas Nagy, a central bank director, said presenting the report.

The vacancy rate in the industrial and logistics property market rose two percentage points to 4% in the first half, mainly because of handovers.

Commercial property investments came to EUR 600 million in the first half, climbing 15% from the same period a year earlier. A few big transactions accounted for 58% of the total.

Nagy said lending conditions for commercial property market investors are expected to ease, albeit "selectively".

He noted that 46% of commercial property loans were under a repayment moratorium at the end of June.

The blanket repayment moratorium will end on October 31 and participation for corporate borrowers will be limited to companies whose turnover has fallen by 25%.

Nagy said local lenders are sufficiently capitalized to manage a potential rise in NPL ratios for commercial property market credit.

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