The Hungarian economy grew at the fastest pace in a decade, with GDP growth reached a strong 5.0% in 2018. Albeit a slowdown is anticipated in the second half of 2019, a solid growth rate of 4.8% is forecast for 2019.
The Budapest office market rallied in the second quarter, supported by strong economic growth. GDP grew by 5.0% last year, the fastest pace in a decade and expanded by 1.5% q-oq in Q1 2019. A slowdown of economic growth is expected in the second half of 2019 due to downward revisions made to the German and eurozone forecasts. The economy is characterised by optimism whilst the GKI business sentiment index has been falling to a level last seen in Q1 2017.
Private consumption growth remains a major driver of the economic growth and is expected to stay robust at 5% this year, supported by a tight labour market and hikes in real wages. Indeed, retail sales continued to expand by more than 5.2% y-o-y in June and the GKI consumer confidence index shows optimism. This has filtered through to the retail property market, which together with growing tourism has sustained occupier demand for prime locations.
Albeit a slowdown of economic growth is anticipated in the second half of 2019 and the HALPIM’s manufacturing PMI declined to levels last seen in 2016, a solid industrial production growth of 6.0% is forecast for 2019. Moving forward the market is expected to remain BTS dominated, but speculative development is on the horizon. The strong rental growth of new products has opened a window of opportunity for repricing existing stock at an improved rental level in prime locations.