Hungarian mortgage market takes off after years of slump
BUDAPEST, April 14 (Reuters) – When it comes to debt, Tamas Balogh likes to play it safe. Only the ability to lock in his monthly mortgage payments for 10 years gave him the confidence to buy a second-hand apartment in Budapest’s booming real estate market.
This caveat is understandable. After taking out loans in foreign currencies that seemed cheap, tens of thousands of Hungarians were defaulted in the wake of the global financial crisis.
But this year, they’re on track to take out more mortgages than any year since 2008 – if developers can only keep up.
This will be a boon for local banks, which saw their loan volumes plunge after the crisis. Today, they forecast double-digit mortgage lending growth for 2017, aided by growing economic growth and a recovery in the real estate market.
K&H, the local unit of the Belgian KBC, and Budapest Bank estimate that the mortgage market will reach around 600 billion forints ($ 2.0 billion) this year, and the latter said the new homes sold at the end of of 2017 could increase this figure even more.
Raiffeisen’s local unit in Austria and Budapest Bank, a state-owned company, aim to rack up twice the issue of mortgage loans last year.
Historically low interest rates, rising real wages, a government housing program for families, tax cuts and years of pent-up demand for new homes have pushed up prices.
The stimulus measures appear to be aimed at helping Prime Minister Viktor Orban retain power next April. Budapest forecasts economic growth of over 4% this year and next, which would be the fastest since Orban took office in 2010.
The central bank says used house prices rose 29.1% from a low in late 2013 to early 2016, while new homes were 12.9% more expensive on average, with prices in Budapest rising by more than 50% in two years.
“I had to make a compromise because I failed to buy an apartment where I had originally planned,” said Balogh, 28, an accounts specialist at IBM who shines as a master of ceremonies at weddings.
“If you stay within your means, there is no problem with borrowing,” said Balogh, who secured his mortgage from the local Italian UniCredit unit to finance about a third of the cost of his apartment. This, he said, was a risk he could take.
Hungarians can no longer borrow in foreign currencies after the volatility of the Swiss franc pushes tens of thousands into default. Stricter rules on income payment levels could also help prevent a repeat of the pre-crisis borrowing frenzy.
In fact, borrowing in forints is now cheaper than it was in foreign currencies before the crisis, which is boosting demand, said David Nemeth, analyst at K&H.
Household debt levels are also below central European averages, according to central bank figures, suggesting that banks have ample opportunity to expand their credit books after years of deleveraging.
Even in a windswept plain between two highways west of Budapest, where a half-finished concrete monolith lay dormant for years, workers are busy installing windows and insulating walls as the Topark project, once condemned, is resurrected.
A new owner is betting that the takeover will transform the neighborhood, a symbolic scar of the real estate crash after the financial crisis, into a new residential hub with 350 new homes and 55,000 square meters of office space in the years to come.
A dozen cranes stand along a main road leading to Budapest. The country registered 31,559 building permits in 2016, more than 2.5 times the figure for the previous year.
Metrodom, a major developer, says it typically sells about a quarter of the apartments in a new housing project within an hour of going live. On a new construction site, there are only about 18 houses for sale out of a total of 182 planned for this project.
“The number of new homes completed could increase significantly this year, but the big jump could be in 2018 and 2019,” said Tamas Kricsfalussy, Director of Sales and Marketing at Metrodom.
The central bank says that despite skyrocketing in recent years, house prices are still below levels that would be justified by economic fundamentals, while mortgage borrowing as a whole remains below prior levels. crisis.
The only real bottleneck in the booming housing market is a shortage of capacity and workers, according to some developers.
“The construction sector either shrank considerably after the crisis or turned to public sector orders, so now almost everyone is grappling with capacity shortages,” said Kricsfalussy of Metrodom.
“Many of the projects announced may never be built. I would say that in the case of 25 to 30 percent of the new homes currently on the market, not a single excavator has been moved yet. ($ 1 = 293.41 forints) (Edited by Hugh Lawson)