Optimism prolonged

The activity of tenants, landlords and investors is increasing in the Hungarian real estate market. The development process is popping up in almost every segment. All of that is supported by buoyant economic development, inflowing EU funds, a low interest rate environment and growing investor appetite. So, everything is given for the further dynamic development of the sector. Accordingly, expectations remain optimistic. In July of 2019, the GKI real estate indices for Budapest and Hungary stood at 13 and 9 points respectively. Both indexes changed within the error of margin compared to the previous (April 2019) survey. The Budapest index increased by 7 points, the national index rose by 3 points on an annual basis. The capital index is on its historical peak, the national index is not much less than its historical peak.

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Cheerful statistics, gloomy expectations

According to April-May data, the growth rate of the Hungarian economy started to slow down in the second quarter compared to the record high dynamism of the first quarter. However, the extent of the slowdown is lower than expected. In addition, the weather seems to be more favourable for agriculture than it was in the past. As a result, GKI raised its 2019 GDP growth forecast from 4 per cent to 4.3 per cent. However, in the second half of the year, the growth rate is expected to slow down significantly, to around 3.5 per cent. An important reason for this is that due to the high level of EU transfers last year, their investment stimulating effects are decreasing this year and the increase of the purchasing power of households is also slowing down. In addition, the EU’s economic sentiment index is almost at its three-year low; the Hungarian one is at its two-and-a-half year low and the German business confidence index, which is very important for Hungary, is at its five-year nadir.

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Business expectations have been deteriorating for seven months

In July, the GKI economic sentiment index fell to a low level not seen for two and a half years as both the business and consumer confidence indices declined. According to the empirical survey conducted by GKI (www.gki.hu) with the support of the EU, the busi-ness confidence index has been steadily falling for seven months and it is currently at its level recorded at the beginning of 2017. Although the consumer confidence index is slightly more favourable than in recent months; its deterioration is most striking if we compare it to the period around the parliamentary elections in the spring of 2018. How-ever, the Hungarian economy is still characterized by optimism.

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Business expectations fell sharply in June

After reaching its two-year low in April and an improvement in May, the GKI economic sentiment index fell to its level of early summer 2017. The deterioration in business expectations continued throughout the year, similarly to the improvement in consum-er ones. The last time when business expectations were so low had been two and a quarter years ago, whereas the last time when consumer ones were so high had been one year ago.

 

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You can download the survey data in Excel 2007 format from here.

You can reach the archive of survey summaries here.

Forecast for 2019

Contrary to expectations, the Hungarian economy did not start to slow down in the first quarter of 2019, and it even accelerated to record speed. Based on this, GKI raised its forecast issued in March: GDP growth from 3.5 per cent to 4 per cent, investments from 7 per cent to 13 per cent, and consumption from 4 per cent to 4.3 per cent. As a result of the overheating of the economy, GKI expects that inflation will be much faster than previously thought (3.7 per cent instead of 3.2 per cent), and the surplus in the current and capital account will be significantly lower (only 1.4 per cent of GDP instead of 3.2 per cent).

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The archive of earlier forecasts is available here.