Will Newly Built Homes Change the Apartment Market

January 29th, 2018

The prices of the apartment market have been increasing steadily over the past five to six years. By now, however, it seems to reach its peak, and perhaps the prices stop rising. However, a new phenomenon can be expected, which surprisingly may be generated by the growth of newly built homes.

Currently, over half of the apartments are rented for an average of 100-150 thousand forints, whether it is an outskirts panel or a flat in Buda or in the downtown. In the city center, even higher amounts have to be paid for the apartment. Previously it was possible to find an apartment for a rent of less than 100 thousand forints, but now even for the smallest apartments over 100 thousand forints are required per month. 

The vast majority in the midfield

While in 2016 it was necessary to pay a monthly fee of 100-150 thousand forints for 38% of the available real estates, in 2017, 45% of the apartments were included in this category. In January 2018, 52 % of the rented apartments went through the 100 thousand forints limit.

 

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Source: Data from Realestate.com

Drastic growth seems to moderate this year; the average price of 130 thousand forints last year grew to 140 thousand forints this January. This growth is considerably less than it was in previous years. The share of apartments below 100 thousand forints per month fell in the market over two years from 43 % to 19 %.

To this the emergence of nearly 20,000 new-built homes on the market may give new direction. 

How much will the newly built apartments be rented for?

It is expected that approximately 20-30 % of this 20,000 new-built homes will be available for the rental market. Pavelka Zsolt, letting manager at Tower-International, believes that the future-built new homes will be divided into two categories: new homes with good location and no or less good location. "It is important to take these two categories separately because apartments with less good location will typically not be bought by investors, as they know they will not get a good profit."

Zsolt Pavelka sees the background of a new phenomenon in well-located homes. "Those who has recently bought or in the future will buy newly built apartment will have to pay more for the real estate that before. Yet he wants a similar yield. That's why he will lease it at a high price, which will dramatically raise prices.” The expert also adds that these properties will typically fall in price ranges between 150 and 250 thousand forints, so they will not increase the midfield. "As a middleway, it is highly likely that new buildings will be chosen in the near future, where technology is more modern and therefore cheaper in terms of costs, but the tenant does not asks for unrealistic price." Thus, the cheaper category of apartments is getting popular in the future, and the apartments in the higher category are also growing. Thus, significantly reducing the popularity of the 100-150 thousand forints category.

 

 

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