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News: Hungary set to 'stagnate'?

The Hungarian government's austerity measures could negatively impact on mortgage lending, the Hungarian Financial Supervisory Authority has warned, reports Porfolio.hu...

This month the Hungarian Financial Supervisory Authority, PSZ┴F, warned that the Hungarian government's austerity measures could negatively impact on mortgage lending.  Declining real incomes are depressing demand for real estate, the watchdog reported in the new study.

PSZ┴F predicts that house prices in Hungary will continue to stagnate, or even fall, as a result of the government's fiscal adjustment measures.  It forecast that average home prices could drop by 10-15% in the latter part of 2007.

The supervisory body expects demand for mortgage loans and property investment products to diminish in the near future, warning that credit institutions should also plan for their losses on loans growing transitionally.

Mortgage loans represent around 21% of total loans in Hungary; about 10% of all property in the country was mortgaged in the middle of 2006.

A slowing economy

Hungary's GDP growth is predicted to slow from 4% growth in 2006 to around 2.5% in 2007 and PSZ┴F are also forecasting a drop in household consumption in real terms this year.  “The negative pressure on lending growth, asset quality and real estate prices is therefore expected," Jiri Stanik of Wood & Co. has commented on Wednesday.

“While the perception of Hungary's austerity programme has been improving (as reflected in market developments and rating upgrades), the negative impact on the banking sector will be visible only in 2007," he added.

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