Back

Cause and effect of HUF exchange rate changes on the real estate market

According to the forint exchange rate forecast, there will be changes in the real estate market in 2022 as well. As a result of the weakening of the forint, the number of foreign buyers on the real estate market increased by 30 percent, according to an analysis by ingtalan.com. In the course of a few weeks or months, Hungarian real estate is now 10 percent cheaper for buyers paying in euros. Residential properties are mainly offered in euros in Budapest and around Lake Balaton. The reasons for the weakening of the forint are complex, and its impact on the real estate market is not negligible.

Reasons and effects of changes in the HUF exchange rate on the real estate market

Since the outbreak of the war in Ukraine, the forint has been in deep flight against the dollar and the euro. Of course, several factors play a role in the exchange rate of the forint, according to experts, such as:

  • a significant decrease in foreign exchange reserves – behind which lies the deficit of the foreign trade balance
    unfavorable international investor sentiment
    the presence of European energy supply risks
    effects of war
    high inflation environment
    the extraordinary strengthening of the dollar
    dwindling trust (e.g.: the multis take the money out in the form of dividends)

As a result of the weakening of the forint, more foreign buyers appear on the real estate market, which can lead to a further rise in real estate prices.

What does the forint exchange rate depend on?

The value of the forint compared to other currencies is influenced by the activities of major capital funds, state measures and announcements, monetary policy, corporate export-import activities, economic and political changes in other countries, and the performance of similar currencies in the area. A currency strengthens when its value increases and the demand for it is higher. When the forint is weak, it not only indicates that it is depreciating, but also that there is no adequate demand for it (e.g. from capital funds, pension funds, investors)

HUF exchange rate change – Why the HUF is weakening

If the euro weakens, the forint also weakens. The reasons for the weakening wave are quite complex, but according to experts, the forint is unreasonably weak compared to regional currencies. According to investors, Hungary is very vulnerable from the point of view of the gas situation, and due to price limiting measures and special taxes, they turn to the Hungarian currency with increased concern.

Currency rates – euro forints

In the first days of July 2022, the forint-euro exchange rate fluctuated between HUF 399-413, which is also illustrated by the MNB’s average exchange rate graph.

Forint árfolyam változása oka - MNB Euro középárfolyam 2022. július

Reason for HUF weakening – MNB Euro average exchange rate July 2022

(source: MNB Central exchange rate – July 2022 monthly overview)

Development of the real estate market

According to MNB analyses, real estate prices, which have been rising continuously for the past 8 years, set a record in 2021. Renovated properties are primarily in demand, and newly built properties are also preferred in prime locations, and you can find a good number of great offers among Kenway’s properties for sale. Buyers are more cautious with those in need of renovation due to unpredictable building material prices and contractor fees. The housing subsidy system is still heating up the real estate market, and buyers prefer properties with the most favorable energetic classification.

Forint árfolyam változása - Ingatlanpiac alakulása

Development of real estate prices

According to real estate market experts, if drastic changes do not occur this year, the real estate market is not expected to collapse, but rather to slow down. The extent of the expected slowdown will be influenced by the demand side. Regarding the evolution of real estate prices, the issues of energy supply, the rate of inflation, the rise in the price of building materials, and possible government interventions in the real estate market will also be important influencing factors on the real estate market.

Expected development of loan rates

Roughly half a year ago, the central bank started to raise interest rates, which is a sign for customers that a credit market process has started, which indicates the imminent end of the period of low-interest market loans. Even before interest rates rise, it is worthwhile to advance the purchase of real estate.