House prices: real differences are greater than those seen on the surface

Housing price spike at the beginning of the year

A significant increase in house prices was seen at the start of 2023, partly driven by an inflow of capital from inflation-linked government bonds into the property market.

Home price and income trends

Home prices have been rising steadily in recent years. As a consequence, the number of square metres that can be bought with average income has been steadily decreasing, i.e. the home-buying value of average income has been declining.

• Incomes include social benefits in addition to salaries, so the relationship of house prices to incomes can be interpreted in several ways.
• The latest KSH data show that 2023 was a particularly unfavourable year for the housing market, with incomes rising significantly due to inflation.
• The year 2024 is expected to bring a correction, while another price increase of more than 10% is likely in 2025, while income growth will be slower.

Regional differences in the housing market

There are significant differences in both incomes and house prices between different regions of the country. In Budapest, house buyers face particularly high prices, but incomes are also higher than the national average.

In smaller municipalities, house prices are lower, but incomes are also lower. An interesting aspect is how prices relate to local incomes by type of settlement.

• In Budapest, only 4 square metres of average annual net income can buy a second-hand dwelling, compared to 14 square metres in small towns.
• People living in villages, although having lower incomes, are in a relatively better position in terms of housing purchase potential.

Overall, the lower income levels in smaller municipalities make it much harder to save or borrow, and they are less attractive in terms of job and entertainment opportunities.

Housing subsidies and needs

Surprisingly, the government is focusing housing subsidy programmes mainly on rural areas, while the housing market in the capital needs urgent intervention. With current house prices far above the income levels in Budapest, the capital's housing market would need special attention.

Source: hvg.hu