Effect of euro and dollar exchange rate changes on the downtown premium real estate market

There is no doubt that the impact of the change in the dollar and euro exchange rates on the downtown premium real estate market is worth mentioning. Since January, the exchange rate of the HUF has weakened by an average of 10% against the EUR, and even more against the USD. Throughout the year, it has been typical for people looking for a stable investment for their money to buy real estate, since there is war next door, the HUF is weakening, inflation is high and there are many economic risks. But what can be expected in the market of luxury apartments in downtown Budapest, are buyers doing well?

What does a change in the dollar and euro exchange rate have on the downtown premium real estate market?

Those foreign buyers who convert the purchase price of the property from euros to forints are the real winners of the “appreciation” of the euro.

In order to see the whole picture of the real estate market, it is necessary to know that mostly foreign buyers, investors, and even a part of Hungarian investors calculate with prices in euros, not necessarily those looking for their first apartment or those moving to a larger apartment.

The purchase price in euros is mainly typical for expensive real estate, premium category downtown apartments, villas, and luxury real estate. While in 2021, on average, only 0.5% of real estate ads were priced in EUR, in 2022 this is roughly 1.5%.

We show you an example, this unique luxury apartment on Szent István körüt, based on its advertised price, due to the increase in the purchase price of the euro compared to the forint, the buyer or investor who bought one of these or something similar in the summer could pay up to HUF 108-120 million could also win on the deal!

What affects the purchase price of euros and dollars

Every day we hear in the news how the exchange rate of the forint has developed compared to the euro or the dollar. But what affects the exchange rate of EUR or USD? In short, the exchange rate is a price expressing the exchange rate at which one currency can be converted to another.

The movement of the current level of the foreign exchange rate and the change of the euro exchange rate can be influenced by various factors.

We would like to highlight 3 that have the strongest influence on the exchange rate of the forint, the change in the exchange rate of the euro and the purchase price of the dollar:

• political decisions
  activities of large capital funds
  transactions of companies operating in the export-import area

Below we also illustrate how the purchase price of the euro and dollar moved in 2022:

Euro exchange rate change

Dollar exchange rate change

(source of graphs: MNB Central exchange rate – 2022 annual overview (mnbkozeparfyolem.hu)

What is the effect of war on these currencies

Only in the last days of October did the dollar’s 8-month strengthening against the euro break. According to expert analysts, the forint exchange rate has also stabilized for the time being, the reason for this being that the MNB is starting an interest rate reduction that will be implemented in several stages, so the interest rate may drop from the current 18% to 16% by next summer, and to 14% by the end of next year.

In recent months, investors hoped for security from the greenback, while the EUR continued to weaken due to the prolongation of the Ukrainian-Russian war, the energy crisis affecting the EU, and the lack of Russian energy carriers also increases inflation in Europe.

In the summer, the well-known Guardian also wrote that the long-seen event (in 2002) occurred, that the dollar is practically equivalent to the euro. The reason is the war in Ukraine, the resulting economic difficulties and the energy crisis.

According to the publication of the MNB, on November 7, 2022, 1 EUR was 401.78 HUF, while 1 USD was 402.34 HUF, so a similar amount must be paid for 1 EUR or 1 USD.

How well do foreign buyers fare with this – What can be expected on the housing market

Not so long ago, in the middle of summer, we wrote in our blog post that the number of foreign interested parties on the Hungarian real estate market increased by approximately 30% as a result of the weakening of the forint.

Hungarian home buyers primarily calculate in forints. Most of the foreign buyers calculate the purchase price in Euros, and most of the properties advertised in EUR are properties in downtown Budapest (primarily luxury apartments in downtown Budapest), properties for sale in the Balaton area and on the western border.

In the summer, the forint weakened by 10% in the space of a few weeks, which undoubtedly benefited foreign buyers.

If the weakening of the forint were to continue, new foreign buyers could appear on the market of downtown properties available at attractive prices, where premium category properties are in demand. They can realize an easy and almost immediate profit due to the exchange rate of the euro purchase price or the dollar purchase price compared to the HUF.

If you are also interested in real estate that can be purchased in USD or EUR, contact us so that we can find the best option for your needs and the capital you want to invest!