Expert thinks Hungary's Home Start could even reduce prices on the Budapest real estate market

Since the announcement of the Home Start programme at the beginning of July, the real estate market has undergone a significant transformation. The 25-year, 3% fixed-rate loan with a maximum amount of HUF 50 million has led to a sharp increase in the number of property searches nationwide. One of the most important questions surrounding the programme concerns its potential impact on real estate prices, which have risen dramatically in recent years.

According to Dávid Tibor, prices in Budapest's districts may even fall.

In his opinion, developers who have been offering new apartments for HUF 1.6-1.7 million per square meter may now set lower prices.

I am convinced that they will bring the price back down to HUF 1.5 million so as not to be left out of the market,

he said.

The expert emphasised that the housing market must be treated differently. While prices of 1.2–1.3 million forints per square metre for new apartments have not typically been seen in rural areas so far, some price increases may be expected in large cities. However, the situation is different in Budapest, where new apartments are being offered at or near the price limit.

According to László Balogh, an expert at Ingatlan.com, the Home Start programme could signal a turning point for the new-build market in Budapest. He states that 4,000–5,000 apartments are currently under construction in the capital, with prices per square metre falling within the 1.5 million forint limit.

It is expected that developers whose prices are close to the limit will lower them below the value limit, as this will enable them to generate revenue sooner.

According to the expert, even developers who currently sell their apartments at much higher prices may seek solutions to enter the programme over a period of 3-4 years. Market competition may also force them to do so; while 40% of second-hand apartments meet the value limit set by Home Start, this figure is only 20% for the new apartment market in the capital.

The current average price per square metre for new apartments in Budapest is HUF 1.6 million. However, developers can charge up to HUF 2.5–2.8 million for properties in the city centre.

If they could reduce it, that would be really harsh. It's not out of the question, but it would mean every apartment had a profit margin of at least 25%, which they could reduce while still making a profit,

said László Balogh.

According to the expert, the price of second-hand dwellings will not increase as much as before. In the capital, the median price of an apartment is currently around HUF 1.4 million per square metre, so an increase of just 6-7% would be enough to reach the HUF 1.5 million mark.

This will certainly cause housing prices to rise in Budapest, but I don't foresee a 15 percent increase,

said the Ingatlan.com expert.

Meanwhile, the government published a table estimating how much borrowers would save with Home Start compared to current market rates. It based its calculation on an 8% interest rate, while it is way above normal current rates.

Both the national data measured by the central bank (MNB) and the most favorable market interest rate available with the average wage are around 6.7%.

We emailed the Economy Ministry with our question about the seemingly excessive interest rate assumption. They referred us to the Prime Minister's Office, and its press office sent us the following response:

The Otthon Start Programme's fixed 3% mortgage loan guarantees a fixed interest rate for 25 years, which is currently unique on the market. By way of comparison, OTP Bank offers customers with an average income a 25-year fixed-rate mortgage at an interest rate of 7.99%.
It is also important to note that the programme is open to many applicants who do not currently own their own property and who, under normal market conditions, would only be offered loans by banks at much higher interest rates.

In view of this, we consider a calculation based on a market interest rate of 8% to be realistic and justified.

Cover photo: Portfolio