Property 25 September 2024, 4:25pm

Hungarian real estate market hits rock bottom - Nowhere to go but up?

Portfolio

What should we expect from the Hungarian property transaction market in the next 12 months? Although there is no big problem, overall nothing is happening, but on the agency side we don't see the future so gloomy, several deals will close this year and we see more deals in the pipeline for next year, said Gábor Zeller, Senior Director of iO Partners Capital Markets, moderator of the financing panel at the 20th Property Investment Forum conference on Wednesday.

The majority of the audience expect transactions to remain subdued over the next year, with a third of respondents forecasting only a slight increase.

We recently inaugurated our flagship project, the Kimpton Hotel and Bem Center office building on Bem Square.

I think we are past the trough and the central bank is also forecasting economic growth in 2025, said László Balassa, Deputy CEO of Market Asset Management Zrt.

He has forgot to mention that the MNB has slashed growth estimates both for this year and next, expecting GDP to expand by as little as 1 to 1.8%.

A low base always provides an opportunity for growth,

so I'm also rather optimistic - added Péter Balogh, Managing Director - Corporate and Specialised Lending, MBH Bank.

Interest rate cuts will be good for the market, but still

without meaningful economic growth there will be no spectacular recovery

said Dániel Gajdos, Head of Structured Finance and Operations, Panattoni Hungary.

When the crisis started, the big question was where the bottom of the market would be. We were more optimistic about Hungary and we were right.

In my opinion, we have reached the bottom of the market and hopefully we will soon start to move upwards.

The favourable situation in neighbouring countries may also extend to Hungary, said Balázs Jávor, Managing Director of Capital Markets Advisory and Special Financing at UniCredit Bank Hungary.

What is missing for Hungary to catch up with the regional growth path?

The lack of foreign capital is clearly visible, with three quarters of the audience citing this as the most important problem.

Experts say that at the current costs, the numbers do not add up today, and there is no sign of exit from the projects. Moreover, there is no transaction constraint in Hungary.

Can the interest rate cuts be expected to boost lending?

Balázs Jávor pointed out that, as a rule of thumb, if bank financing becomes cheaper it increases demand, but in Hungary there are so many other effects that he would be surprised if this suddenly doubled the number of transactions.

According to Péter Balogh, it takes 5-7 years before a bank can judge whether an activity will work well, so they can think in such timeframes. Longer timeframes currently do not "sit well" with the risk appetite of banks.

As a developer, László Balassa said that it is possible to implement projects that are good products in terms of the market and bank financing. They have recently bought the 'Körszálló" and a property behind the Gellért Hotel, but they are not only thinking about bank financing.

In which areas will funding improve the most?

The audience voted for hotel, while almost no one voted for office, but experts say it is surprising that no one voted for the office market, while this market is gradually emerging from the shock of the coronavirus pandemic. Dániel Gajdos stressed that whatever the product, added value is always needed.