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Residential property market upswing continues

The housing market in Hungary shows signs of change: although the number of sold residential properties has decreased, prices have continued to climb. The new homes market is booming.

According to information released by the Duna House real estate company, the number of residential properties sold in October was 12,246 in Hungary. This is 1,393 less than in September, and 1,609 less than the record sales in May. However, on a year-on-year basis, this is an increase of 13.5%, business daily Világgazdaság reports.

During the last few years, the number of transactions in the second half of the year has always been lower than those in H1. But based on October, Duna House expects higher sales in Q4 of this year than one year ago.

As for prices, a quarterly gauge by the National Bank of Hungary shows that home prices in Hungary rose an annualised 15.3% in the second quarter, lifted by higher prices in smaller settlements.

Prices climbed 14.6% in the capital during the period, slowing from 17.3% in the previous quarter and 23.5% in Q4 of last year. At the same time, home prices in smaller settlements jumped 25.9%, picking up from an 11.2% rise in Q1 and a 7.6% increase in Q4. Home prices in cities were up 11.4% in Q2.

New home developments still show a very steady expansion. The number of home building permits issued in Hungary in Q1-Q3 rose 32.7% year-on-year to 28,411, data released by the Central Statistics Office (KSH) today shows. The number of home building permits issued in Budapest rose 103.5% to 10,952. In county seats and cities with more than 50,000 residents, the number was down 4.6% at 6,075.

Late in 2015, Hungarian lawmakers temporarily lowered the VAT rate on home construction from 27% to 5% and eased rules for obtaining building permits. Around the same time, the government launched a home purchase subsidy program for families with children. The number of completed homes rose 51.5% to 7,981 for the whole country and was up 17.6% at 1,660 in Budapest.

KSH noted that property developers and private individuals each built about a 50% share of the completed homes, unchanged from a year earlier. The average size of new homes was 97 sqm, up by four square metres from a year earlier.

Industry insiders have warned that the home building boom in Hungary could fizzle out if the government does not extend or make permanent the preferential VAT rate on home construction. The preferential rate is set to expire at the end of 2019.