| BUDAPEST, April 14
BUDAPEST, April 14 When it comes to debt, Tamas
Balogh likes to play it safe. Only the option to lock in monthly
payments on his mortgage for 10 years gave him the confidence to
buy a used flat in Budapest's booming property market.
That caution is understandable. After taking out foreign
currency loans that looked cheap, tens of thousands of
Hungarians were pushed into default in the wake of the global
But this year, they are on course to take out more mortgages
than any year since 2008 - if the developers can only keep up.
That will be a boon for local banks, which saw their lending
volumes plunge after the crisis. Now they are forecasting a
double-digit expansion in mortgage lending for 2017, helped by
rising economic growth and a recovery in the property market.
K&H, the local unit of Belgian KBC, and Budapest
Bank estimate the mortgage market will come to about 600 billion
forints ($2.0 billion) this year, and the latter said new homes
sold late in 2017 could lift that figure even higher.
The local unit of Austria's Raiffeisen and
state-owned Budapest Bank aim to rack up twice last year's
Record low interest rates, rising real wages, a government
housing programme for families, tax cuts and years of pent-up
demand for new homes have sent prices soaring.
The stimulus measures appear to be aimed at helping Prime
Minister Viktor Orban retain power next April. Budapest
forecasts economic growth of more than 4 percent this year and
next, which would be the fastest since Orban took power in 2010.
The central bank says the prices of used homes rose by 29.1
percent from a late-2013 trough to the start of 2016, while new
homes were 12.9 percent more expensive on average, with prices
in Budapest surging more than 50 percent within two years.
"I had to make a compromise, because I did not manage to buy
a flat where I originally planned," said Balogh, 28, an account
specialist at IBM who moonlights as a master of
ceremonies at weddings.
"If you stay within your means, there is no problem with
borrowing," said Balogh, who got his mortgage from the local
unit of Italian UniCredit to finance about a third of
the cost of his apartment. That, he said, was a risk he could
Hungarians can no longer borrow in foreign currencies after
volatility in the Swiss franc pushed tens of thousands into
default. Tighter rules on payment-to-income levels could also
help prevent a repeat of the borrowing binge before the crisis.
In fact, borrowing in forints is now cheaper than it used to
be in foreign currencies before the crisis, bolstering demand,
said David Nemeth, an analyst at K&H.
Household debt levels also lag central European averages,
according to central bank figures, suggesting banks have ample
room to expand their loan books after years of deleveraging.
Even on a windswept plain between two highways west of
Budapest, where a half-finished concrete monolith lay dormant
for years, workers are busy fitting windows and insulating walls
as the once-doomed Topark project is resurrected.
A new owner is betting that the upswing will transform the
area, a symbolic scar of the property market crash after the
financial crisis, into a new residential hub with 350 new homes
and 55,000 square metres of office space in the coming years.
A dozen or so cranes loom along a main road into Budapest.
The country registered 31,559 home building permits in 2016,
more than 2.5 times the previous year's figure.
Metrodom, a major developer, says it usually sells about a
quarter of flats in a new housing project within an hour of
posting them online. At a new construction site it has only
about 18 homes to sell of a total 182 planned for that project.
"The number of new homes finished could increase
substantially this year, but the big leap could come in 2018 and
2019," said Tamas Kricsfalussy, sales and marketing director at
The central bank says that despite the runup of recent
years, home prices are still short of levels that would be
justified by economic fundamentals, while overall mortgage
borrowing remains below pre-crisis levels.
The only real bottleneck to the booming housing market is a
shortage of capacity and workers, some developers say.
"The construction sector shrank significantly after the
crisis or turned towards public sector orders, so now almost
everyone is struggling with capacity shortages," Metrodom's
"Many of the announced projects may never be built. I would
say that in case of 25 to 30 percent of new homes now offered in
the market, not a single shovel of dirt has been moved yet."
($1 = 293.41 forints)
(Editing by Hugh Lawson)