Real estate market: misleading trends?

Current housing market situation

The housing market in particular has seen dynamic price increases, driven by a number of factors such as capital withdrawals from the government bond market and the reallocation of pension savings. At the same time, small positive changes expected in early 2025 are also contributing to the trend.

• News of market changes can act as a self-fulfilling prophecy.
• In addition to previous growth expectations of 7-10%, a forecast of 17% has now been published.

Analysts' approaches

Economists and housing market analysts, including experts from the MNB, often compare average income to house price developments. Average income determines both the ability to accumulate equity and the ability to borrow. Based on this logic, there is no anomaly in the market in the current economic circumstances.

Differences between average income and disposable income

Average income does not always accurately reflect market reality. It is therefore more appropriate to use disposable income as a benchmark, which includes social and entrepreneurial income in addition to labour income. The graph below clearly shows this difference:

• Prices have risen by only 17% since 1999 relative to average income.
• The rate of price increases is 55% higher relative to total disposable income.

Future outlook for the housing market

Although prices do not show a downward trend in the short term, in the long term several downward factors may affect the market. These could include real revaluation, which could lead to below-inflation price increases or stagnation.

International context

The rise in house prices is not only a problem in Hungary. Many foreign political leaders have also set the goal of improving housing affordability. The situation also poses serious challenges for policy makers at international level.

Source: www.portfolio.hu