No stability risk from investor-fuelled Hungarian house price surge, central bank says

By Gergely Szakacs

BUDAPEST (Reuters) - A surge in Hungarian house prices is driven by investors rather than borrowers and is therefore less risky to financial stability, the central bank told Reuters.

Any tightening of credit standards would have a limited impact on prices, the bank said.

The bank was responding to a survey by real estate company ingatlan.com that said prices in Budapest jumped by nearly 17% year-on-year in February, the fastest pace in three years. This had been fuelled by retail government bond holders funnelling some savings into the housing market, the survey said.

The central bank's own survey showed Budapest house prices rising by an annual 15% in the fourth quarter, with the pace of price growth accelerating further in the first two months and the Budapest property market showing sings of overheating.

No cooling off was on the horizon as house prices were climbing faster than incomes or rental costs, it said.

"The increase in demand in the housing market is driven not primarily by credit growth, therefore, it is less risky from a financial stability aspect," the bank said in an emailed reply to Reuters questions.

Prime Minister Viktor Orban's government spent 1.038 trillion forints ($2.83 billion) on debt servicing in the first two months, worth some 1.2% of Hungary's estimated 2025 gross domestic product, following a surge in inflation.

"Investors pulling out from government bonds only partially returned to the housing market, but even that had caused such a demand boost in Budapest, that prices have taken off," ingatlan.com real estate expert Laszlo Balogh said.

"This also forces buyers looking to acquire property for their own use onto the market as they are looking to avoid being priced out," Balogh said.

Hungarian house prices have more than tripled between 2010 and the third quarter of 2024 based on Eurostat data, the fastest pace in the European Union alongside Estonia.

The central bank said households' stock of mortgages as a percentage of economic output was among the lowest in the EU, while a majority of housing market transactions were financed without borrowing.

"Any tightening (for example in credit affordability standards) could impede the ability of some households to buy homes, while having a limited impact on house prices," it said.

($1 = 366.67 forints)

(Reporting by Gergely Szakacs; Editing by Angus MacSwan)