Property prices and rents could fall in Hungary due to high gas and energy prices
The Hungarian government’s new utility price regulations could drive down real estate prices in downtown Budapest and other major cities. As we have already reported, the government commissioner said last week that private individuals in Hungary would be charged below real market prices for their gas and electricity consumption, even if it exceeded the average level below which a price cap was applied. However, this new price will still be several times higher than the old one. This could have a considerable effect on the Hungarian real estate market.
Not everyone will be able to buy gas and electricity at capped prices
According telex.hu, the international energy crisis and the latest government decisions regarding utility price caps in Hungary will have a significant effect on household energy consumption and real estate prices. The changes will likely affect offices, hotels and medical practices operating in apartment buildings.
If those buildings only have one gas meter, their condo managers must report the number of apartments and spaces occupied by businesses by August 15 to receive the utility price cap. This is important because there are many offices, doctors’ offices, Airbnb hotels and businesses downtown. On the condition of not receiving electricity and gas at the capped price next year, real estate prices will be largely uncertain in the big cities.
László Balogh, an expert at the Hungarian property search website, ingatlan.com, said this would likely raise questions at the general meeting of owners when discussing which apartments benefit and which do not benefit from the price. reduced. If the authorities discover that a consumer has received the gas or electricity incorrectly, they can pay 1.5 times the market price as a fine.
City center apartment prices could drop significantly
Despite the uncertainties, there are positive scenarios for 2023, Mr Balogh said. This could mean a strategic difference in keeping the SME sector competitive if they continued to get gas and electricity at the capped price. Airbnb hotels operating in condominiums will gain a significant market advantage over traditional hotels. Hotels already pay the market price for energy and heating.
However, if the SME sector does not benefit from the reduction, the value of offices, Airbnb hotels and medical practices operating in condominiums will plummet. Indeed, the operating costs will increase considerably.
The process could be useful to potential buyers as it could bring down the price of downtown apartments. In addition, investors could choose to rent their apartments for a longer term, which would lead to lower rental prices.
Szilárd Németh, the government commissioner in charge of the government’s utility price cap scheme, announced the new utility price cap rules last weekend:
- the price cap will be applied up to 1,729 cubic meters of gas consumed per year (144 m3/month) and up to 2,523 kilowatt hours of electricity consumed per year (210 kWh/month) by a household.
- Households will pay 102 HUF (0.25 EUR) for a cubic meter of gas for their consumption below the limit, and 747 HUF (1.88 EUR) for each excess cubic meter, while the market price is 1,020 HUF (2.56 EUR)
- One kilowatt hour of electricity will cost 36 HUF (0.09 EUR) below the limit and 70.1 HUF (0.18 EUR) above it, while the market price is 268.9 HUF (0.68 USD)
- Separately metered water heaters operating at night will be charged 23.1 HUF (0.058 EUR) per kilowatt hour below the limit and 62.9 HUF (0.16 EUR) above.
These figures mean that the price of electricity will double, while the price of gas will be seven times higher than average consumption.
Source: telex.hu, DNH