Annual assessment and reflection on the downtown real estate market
A year ago, with a somewhat stagnant but secure market, the real estate profession entered the new year from 2019. In the first two months of 2020, the sales took place with a seasonal intensity, in terms of the demand and supply conditions of the downtown real estate market, as the specialist of the area, Central Home, evaluates last year.
As COVID-19 arrived with the spring, the year 2020 immediately took a dramatic turn. The year of the pandemic, the epidemic situation and the accompanying restrictions have, of course, also left their mark on this special, multi-movement market. The spring quarantine, April and May, has already brought drastic cuts, as entry into the country has been eliminated and the first shock has prompted sellers and buyers alike to wait. The summer lockdown brought a bit of a boom, thanks to which there were already stronger trends in July and August compared to the second quarter, there was some market movement that persists to this day.
“As we have mentioned several times in our previous analysis, the main feature of the market over the past six months has been the waiting position,” says Ben-Ezra Orran, an expert at Central Home. – “We can observe that the offer price of many properties seen on advertising portals does not decrease, or if so, to a minimum, sellers are willing to go down by a maximum of 10% of their idea. Meanwhile, on the other side, we can see that customer groups have also settled on waiting, expecting a larger and more drastic price cut. The only exceptions to this are newly built, exclusive properties, where the current situation does not determine the commitment.”
Of course, government measures and announcements affect the real estate market in addition to everyday life. The current restrictions have been extended until the 11th of January 2021, so based on these market dynamics, it is quite certain that the previously well-used wave of purchases, which were often the end of the year, the beginning of the year, when traditionally businesses and individuals have also timed a larger number of real estate purchases. So it can be said that in 2020, these buyers and purchases will no longer appear in the downtown real estate market this year.
Based on the decisions of the Hungarian government and the MNB, similarly to Europe, the main effort was to try to balance the loss of income and activities by providing resources continuously, for example by cutting interest rates. In Hungary, this meant a VAT reduction for newly built properties or a moratorium on loan payments as an option. From a real estate sales standpoint, this meant that no collapsed authentic homes were brought back into the real estate market and real estate prices did not start to fall sharply.
What happened in the downtown area?
The downtown real estate market has traditionally been the main arena for investors, including a significant number of foreign investor groups. Due to the rules and travel restrictions that came into force due to the restrictions, their absence was significantly noticeable and felt.
“Central Home’s experience is that in terms of transaction numbers, the decline was more noticeable in our area than outside the downtown districts. Due to the lack of foreign buyers, the decline in sales was more spectacular than even in the suburbs of Budapest. The main reason is that foreign buyers have more weight in the city center, but this year, unfortunately, they could not come to Hungary for known reasons,”continues Ben-Ezra Orran.
What can we expect in 2021? Will Airbnb revive?
According to the expert, in the first quarter can not be expected much other than the current situation. A stagnant, low-speed market is forecast, where expectation will continue to be the main factor that will be typical. As Ben-Ezra Orran puts it, “Basically, we see the salesman and buyer group facing each other, waiting for who will be the first to move.”
The second quarter of 2020 could already give cause for confidence, especially if access to the vaccination program and vaccines becomes widely possible. As the European and world markets begin to reactivate, it is expected that the impact will be felt in Hungary as well. As we have to live in fewer and fewer constraints and the number of tourism and business trips from abroad will increase drastically, the natural consequence of this is that the downtown real estate market is likely to explode again towards the end of the second quarter and grow more intensively again. Experts believe that as travel appetite and business travel increase, Airbnb will find itself somewhat, even because travelers will feel safer to stay in places with fewer contacts. The volume of this, of course, will be partly in the hands of local governments in connection with regulations, and on the other hand, the more important question is whether people dare to travel, trust the vaccine and the protection they promise. Central Home’s team of experts believes that there may be a chance that in the summer of 2021, 60-70% of the previous turnover of Airbnb apartments could be realized again in downtown Budapest.