02 Mar 2020 – Hungary (Budapest)
Last week I was in the richly historical Budapest, a city formed after the settlements of Buda and Pest were united in 1873- an apparently well-known fact which had, nevertheless, alluded me until recently. Although somewhat wet and windy, there is no denying the grand beauty of Budapest. I have personally never visited a place with so much incredible architecture. Even when walking down the quietest of suburban streets, amongst the soviet-era apartment buildings, I often came across the most stunningly ornate baroque-style villas.
Since 2013, Hungary has experienced remarkable growth in its residential sector with Budapest being the primary driver. In real terms, prices in Budapest rose by between 10-20% year-on year between 2015 and Q3 2019. However, there has been a notable slowdown since then, with many local experts, with whom I consulted, believing that the market was beginning to plateau after years of growth. The Central Bank of Hungary recently reported that price growth in Q3 2019 was nearly 2% lower than Q3 2019 at 1.26% quarter-on-quarter. Capital and rental prices can vary dramatically depending on the area, with some districts such as the 5th or 6th commanding prices well over twice as high as the less desirable outskirt districts.
The office market in Budapest has seen a lot of interest over recent years. There is currently just under 37 million square metres of stock with a further 1 million square metres in the pipeline. A great deal of the interest and new development has centred around an area of Pest called the The Váci Corridor. It is the largest office submarket in Budapest with 31% of all Grade A stock and accounts for 40% of all completed office space over the past five years. As of the end of Q4 2019, the average asking rent level is EUR 13 per sq m/ month with the average for Grade A being EUR 15 per sq m/ month. Although the rental prices for Grade A grew by 3.6% on the year, it has become clear that growth is slowing with prices remaining flat for the last quarter of 2019. It is anticipated, as the pipeline begins to deliver, there will be a downward pressure on prices, particularly at the top end of the market.
Land prices vary dramatically depending on the area and the zoning regulations of any given plot. Land prices around the Váci Corridor generally sell for between EUR 400-500 per square metre, whilst land in the CBD and around the 5th and 6th district can sell for over EUR 1,100. Due to the scarcity of developable land around the popular areas of the city, price growth looks set to remain steady for land, even whilst other sectors of the market begin to slow.