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Hungary Real Estate Report Q4 2010
Business Monitor International, Aug 2010, Pages: 70
The Hungary Real Estate Report provides industry professionals and strategists, corporate analysts, real estate associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Hungary's Real Estate industry.
In mid-2010, BMI’s in-country sources in Hungary indicated that they are looking for a fairly sharp recovery in rental rates over the next year or so. After the grim conditions that protagonists in the Hungarian commercial Real Estate sector have endured over the last two years or so, such an outcome would be a major change.
However, it is not an outcome that we expect. A part of the problem is that any economic growth that takes place over the medium-term will likely be driven by net exports – particularly, to Germany and within Hungary’s automotive sector. Spending by households is constrained by rising unemployment and a retrenchment following the debt-funded consumption prior to mid-2008. Retail sales have been falling consistently for the last three years and are likely to contract further. The government is committed to fiscal austerity as a part of its Stand-By Agreement with the IMF. Corporations are restructuring their balance sheets and, collectively, are not in a position to invest heavily.
These negatives will outweigh positives such as: an improvement in the political environment, the return of Hungarian financial markets to stability, and the reduction in official interest rates to record low levels. Information provided to us by our in-country sources in our first interviews – which took place at the beginning of the year – suggests that vacancy rates in the office sub-sector are very high in both Budapest and Györ. New office space is not being absorbed, as tenants tend to prefer to renegotiate existing leases rather than to move. We assume that conditions are similarly difficult in the retail and industrial subsectors. Office rents have fallen over the last year or so. This has contributed to a fall in yields – although not to the levels that were prevailing in 2008 or earlier. While we do not share the optimism of our in-country sources, we accept that much of the adjustments to rents, yields and capital values in Hungary have already taken place. Accordingly, we look for yields to track sideways in the 2011-14 forecast period.
Key Features Of This Report
This is the latest edition of a new series of industry reports published by BMI that seeks to identify the key dynamics of the real estate sectors of 44 countries around the world, some of which are developed and some of which are, in every sense, emerging markets. The questions that we seek to answer for each country remain as follows: What are the main issues for actors in and around real estate development in the country concerned, over both the long and the short term? What are the main constraints that they face? What are the key insights to be gleaned by comparing the real estate sector of a country with its regional peers?
In Q3 we introduced a very substantial improvement to our reports. We incorporated data and qualitative observations provided to us by commercial real estate agents operating in the countries we survey. As a result we have gained a much clearer picture of the balance between demand and supply in each of three main sub-sectors – office, retail and industrial. We have also introduced a new approach to the forecasting of rental yields, which is
discussed in the methodology section of this report.
In Q4, we have incorporated a lot of new data in relation to rents and yields in 2010. We gained this data through a new round of interviews with our in-country sources in mid-2010. In some cases, the latest information from our sources has caused us to make significant revisions to our forecasts for 2011-2014. We asked our sources to indicate what growth in rents is likely for 2011. We explain their answers in the Forecast Scenarios.
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