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Hungary Real Estate Report Q1 2011
Business Monitor International, Nov 2010, Pages: 72
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.
Difficult conditions are likely to prevail across all three real estate sub-sectors and most cities in Hungary. One problem is that the main driver of economic growth over the coming years, net exports, is not likely to produce a substantial increase in demand for industrial property (or other kinds of real estate). Another problem is that domestic demand is not going to recover anytime soon. Rising unemployment (and/or over-borrowing in the past) is constraining households from spending. Retail sales have been contracting steadily for the last three years. The stand-by agreement between the government and the IMF means that austerity remains the order of the day for the government. Companies have been de-gearing and are unable (if not unwilling) to invest.
Retail sales in Hungary over the course of the first seven months of 2010 fell by 3.8% y-o-y. However, in July, sales actually rose for the first time in more than 40 months, by 1.7% on an annualised basis. While this is a positive sign that household consumption is beginning to stabilize, we hold to our view that retail sales are likely to disappoint over the medium term given the large stock of external debt owed by the private sector, and the ongoing weakness in the forint.
The Hungarian government's plans to push ahead with a new mortgage relief plan would, in our view, severely harm an already weak banking sector if enacted by parliament. Indeed, currently being discussed by the ruling Fidesz party as part of its strategy to help beleaguered debtors service their outstanding loans, the proposal would almost certainly weigh on bank's profit levels, in turn limiting the availability of new credit within the economy and putting Hungary's low growth trajectory under further downside pressure.
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