Hungary mortgage market takes off after years in doldrums

MBH Jelzalogbank Nyrt

14/04/2017 12:00

By Gergely Szakacs 
    BUDAPEST, April 14 (Reuters) - When it comes to debt, Tamas 
Balogh likes to play it safe. Only the option to lock in monthly 
payments on his mortgage for 10 years gave him the confidence to 
buy a used flat in Budapest's booming property market. 
    That caution is understandable. After taking out foreign 
currency loans that looked cheap, tens of thousands of 
Hungarians were pushed into default in the wake of the global 
financial crisis. 
    But this year, they are on course to take out more mortgages 
than any year since 2008 - if the developers can only keep up. 
    That will be a boon for local banks, which saw their lending 
volumes plunge after the crisis. Now they are forecasting a 
double-digit expansion in mortgage lending for 2017, helped by 
rising economic growth and a recovery in the property market. 
    K&H, the local unit of Belgian KBC  KBC.BR , and Budapest 
Bank estimate the mortgage market will come to about 600 billion 
forints ($2.0 billion) this year, and the latter said new homes 
sold late in 2017 could lift that figure even higher. 
    The local unit of Austria's Raiffeisen  RBIV.VI  and 
state-owned Budapest Bank aim to rack up twice last year's 
mortgage issuance. 
    Record low interest rates, rising real wages, a government 
housing programme for families, tax cuts and years of pent-up 
demand for new homes have sent prices soaring. 
    The stimulus measures appear to be aimed at helping Prime 
Minister Viktor Orban retain power next April. Budapest 
forecasts economic growth of more than 4 percent this year and 
next, which would be the fastest since Orban took power in 2010. 
    The central bank says the prices of used homes rose by 29.1 
percent from a late-2013 trough to the start of 2016, while new 
homes were 12.9 percent more expensive on average, with prices 
in Budapest surging more than 50 percent within two years. 
    "I had to make a compromise, because I did not manage to buy 
a flat where I originally planned," said Balogh, 28, an account 
specialist at IBM  IBM.N  who moonlights as a master of 
ceremonies at weddings. 
    "If you stay within your means, there is no problem with 
borrowing," said Balogh, who got his mortgage from the local 
unit of Italian UniCredit  CRDI.MI  to finance about a third of 
the cost of his apartment. That, he said, was a risk he could 
stomach. 
    Hungarians can no longer borrow in foreign currencies after 
volatility in the Swiss franc pushed tens of thousands into 
default. Tighter rules on payment-to-income levels could also 
help prevent a repeat of the borrowing binge before the crisis. 
    In fact, borrowing in forints is now cheaper than it used to 
be in foreign currencies before the crisis, bolstering demand, 
said David Nemeth, an analyst at K&H. 
    Household debt levels also lag central European averages, 
according to central bank figures, suggesting banks have ample 
room to expand their loan books after years of deleveraging. 
     
    RESURRECTED 
    Even on a windswept plain between two highways west of 
Budapest, where a half-finished concrete monolith lay dormant 
for years, workers are busy fitting windows and insulating walls 
as the once-doomed Topark project is resurrected. 
    A new owner is betting that the upswing will transform the 
area, a symbolic scar of the property market crash after the 
financial crisis, into a new residential hub with 350 new homes 
and 55,000 square metres of office space in the coming years. 
    A dozen or so cranes loom along a main road into Budapest. 
The country registered 31,559 home building permits in 2016, 
more than 2.5 times the previous year's figure. 
    Metrodom, a major developer, says it usually sells about a 
quarter of flats in a new housing project within an hour of 
posting them online. At a new construction site it has only 
about 18 homes to sell of a total 182 planned for that project. 
    "The number of new homes finished could increase 
substantially this year, but the big leap could come in 2018 and 
2019," said Tamas Kricsfalussy, sales and marketing director at 
Metrodom. 
    The central bank says that despite the runup of recent 
years, home prices are still short of levels that would be 
justified by economic fundamentals, while overall mortgage 
borrowing remains below pre-crisis levels. 
    The only real bottleneck to the booming housing market is a 
shortage of capacity and workers, some developers say. 
    "The construction sector shrank significantly after the 
crisis or turned towards public sector orders, so now almost 
everyone is struggling with capacity shortages," Metrodom's 
Kricsfalussy said. 
    "Many of the announced projects may never be built. I would 
say that in case of 25 to 30 percent of new homes now offered in 
the market, not a single shovel of dirt has been moved yet." 
 ($1 = 293.41 forints) 
 
 (Editing by Hugh Lawson) 
 ((gergely.szakacs@tr.com Twitter: https://twitter.com/szakacsg 
 ; +36 1 327 4748; Reuters Messaging: 
gergely.szakacs.thomsonreuters.com@reuters.net)) 
 
Keywords: HUNGARY MORTGAGES/