Residential Area: 4 Key Factors Determining Property Prices
When buying real estate, it’s always worth knowing what the residential area entails and what can influence property prices there. Armed with this knowledge, we can spare ourselves from unpleasant surprises.
Residential area
The residential area is the territory designated for everyday living. Four types of residential zone classifications are known, depending on local regulations, buildability, and environmental factors. The location of the property being considered for purchase matters significantly. The following residential zone classifications can be encountered:
Urban residential area
These areas are characterized by high-density construction and tall residential buildings. Commercial, service, educational, healthcare, and sports facilities are frequently available in the area.
Suburban residential area
Similar to urban areas, these are densely built, but buildings here can be a maximum of 12.5 meters tall. These areas are well-equipped with commercial, service, educational, healthcare, and sports facilities.
Garden suburb residential area
The density of construction is lower here, with larger plots belonging to properties. Buildings here can be a maximum of 7.5 meters tall. While service, educational, healthcare, sports, and commercial facilities are available, they are more scattered compared to urban areas.
Rural residential area
Large plots accompany residential buildings here as well. Commercial, educational, and other facilities may not be readily available within each settlement. The emphasis in residential areas tends to be more on agricultural and forestry structures.
Other zones
Resort zone
There are two types of areas under this classification: holiday home areas and weekend house areas. Both aim to preserve the opportunity for relaxation and recreation. The resort areas typically feature campsites or campgrounds containing multiple resort units.
In the case of weekend house areas, the most common form is the weekend cottage. These areas allow for a maximum of two apartments, and buildings can be a maximum of 6 meters tall.
Rural area
The rural area belongs to the administrative territory of a given settlement but primarily includes agricultural, forestry, and water management areas. From an industrial perspective, it also includes landfills, watercourses, and mines. These are typically purchased for investment purposes, especially when there’s anticipation of the area being designated as urban within a foreseeable timeframe.
Garden plot
Also classified as part of the rural area of a settlement. These typically allow for a buildability of 3%, and often, buildings erected on these plots serve purely economic purposes. Loans cannot be obtained for such properties. It’s always advisable to verify whether these areas have been exempted from agricultural cultivation.
Residential price changes in 2023
The number of housing sales continued to decline at the end of 2023. The largest decrease in turnover was observed in county seats.
Housing market turnover had already decreased in all settlement categories in 2022. In 2023, the number of housing sales continued to decline the most in county seats, while in smaller settlements, the decrease in turnover was milder than average.
Source: KSH
Among panel flats, condominium apartments, and family houses, the deteriorating market position of family houses continues to be noticeable. Except for the West Transdanubia region, the price per square meter for family houses has decreased in every region of the country compared to previous periods. The most significant decline (10%) was observed in the Pest region.
Residential areas – Outstanding properties in terms of price
Among family houses, nine of the top ten most expensive properties are located in Budapest, with one in Debrecen. The price per square meter of the most expensive family houses approached 1.4 million forints. For the cheapest family houses, this value remained below 30,000 forints per square meter. The two least expensive family houses were available in Békéscsaba and Füzesabony.
Source: KSH
Condominium Apartment
In the case of condominium apartments, Balatonfüred leads the list among the top 10 most expensive properties, followed by Siófok. The price per square meter of these properties ranges between 2.4 million and 1.7 million.
The two cheapest condominium apartments are available in Mezőhegyes. Here, too, the price per square meter of the apartments remains below 30,000.
Source: KSH
Panel Apartment
In the case of panel apartments, with the exception of two settlements, Budapest properties occupy the top 10 positions. The typical price per square meter is around 1 million.
The two cheapest panel apartments can be found in Battonya and Salgótarján, with prices ranging from 75,000 to 45,000 per square meter.
Source: KSH
Residential Zone – Factors Influencing Property Prices
The surroundings of a property are fundamental in determining its price. The above lists also show that there can be significant differences within a single settlement in terms of area amenities. Proximity to parks can also significantly increase property value.
Demographics
Declining population, increasing housing supply, and population migration collectively have a negative impact on property prices. Many rural areas struggle with this issue.
Transportation
Good transportation options are also decisive. Proximity to public transportation always increases property value. Provided it’s not directly adjacent to a busy road or tramline passing under the window.
Proximity to a railway station can increase property value, but it’s important that the station loudspeaker doesn’t sound directly under the window.
Infrastructure, Shopping Centers, Industrial Parks, Logistics Centers
The infrastructure of the residential area and its development are decisive for property prices. During development, roads, sewers, commercial, and service facilities are established. Investments improve the area’s supply and quality, leading to an increase in property prices.
A fundamental requirement is that the investment reaches an appropriate level, aligning with the expectations of the area.
The creation of parks, pedestrian streets may not directly increase property prices. However, they indirectly contribute to the betterment and beauty of the residential area.
Shopping centers, commercial developments have a price-increasing effect even before the investment begins. These centers act as reference points for properties in the area, adding more value to nearby properties. It raises the value of properties in the area.
Industrial development, the creation of logistics centers typically play a role in decreasing prices in most cases. Because it brings noise and increased traffic to the area. Industrial investments can play a price-increasing role when they are located at a sufficient distance from residential areas and create significant employment. Such investments primarily contribute to price increases in areas further away from the capital.
Before buying, it’s worth finding out about the expected developments in the area.
Green Solutions
Interest in “green” properties is steadily increasing. These properties maintain their value and even increase it over the years.
Among the many advantages of green solutions are reduced utility costs, typically electricity bills. Proper insulation leads to a decrease in heating bills.
Before purchasing real estate, consult with representatives from the Kenway team regarding various residential zone characteristics.