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Hungary Real Estate Report Q1 2012
Business Monitor International, Dec 2011, Pages: 49
Business Monitor International's 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.
Hungary’s real estate market, like so many others, was seriously damaged by the global financial crisis. Economic growth is now returning and with that will come an uptick in demand for office and retail space, as well as industrial property. Nevertheless, this is once again under threat as Hungary's economy will display marked weakness over the coming quarters as all components of GDP by expenditure come under pressure on the back of a slowing global macroeconomic backdrop exacerbated by a fragile domestic economy. BMI has therefore been prompted to lower its real GDP growth forecast for 2011 to 1.6% y-o-y from 2.9% and highlight that risks to this forecast are firmly to the downside.
In addition, the latest figures from Hungary's statistics agency paint a bleak picture of the construction sector, with Q1 2011 figures weaker than those recorded in Q1 2010. As a result it is probable that forecasts may be revised further as new data become available in 2011. At present the industry is forecast to stand at US$5.1bn in 2011, rising only slightly over the forecast period to reach US$6.1bn by 2015. Low growth rates will characterise the industry up until 2020 with projected average y-o-y growth of just 2.09% over the next decade. In the long term, this slowdown of the project pipeline will have upside pressure on the rental yields of current projects particularly that of A-grade quality space.
Key Opportunities:
- Demand for office space is beginning to pick up. Given the very low amount of capacity added over the past couple of years, demand will begin to outstrip supply sooner rather than later.
- Rental rates are expected to increase through 2012. At the same time, yields will fall slightly, as property values are likely to increase a little faster than rents.
- Rising property prices in Poland are encouraging investors to once again look at other markets in the CEE area.
- BMI expects Hungary will continue to converge, both economically and politically, with Western Europe over the next decade, and will remain one of the more politically and socially stable countries in the emerging Europe region.
Key Risks:
- The availability of finance is likely to be limited. In a banking sector survey released in July 2011 Moody's Investors Service said the outlook for Hungary's banking sector remains negative.
- Households and businesses are carrying large amounts of debt, much of it denominated in foreign currencies. The falling value of the Hungarian forint is putting stress on the borrowers’ ability to service this debt. Their appetite to take on more financial obligations is very limited. Unemployment levels remain persistently high. In fact, the unemployment rate actually crept back up to 11.6% in Q111.
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