The decline in valuation on Hungary's commercial property market came to a halt from Q2 2024 following a prolonged downturn, but weak GDP growth and high investor uncertainty continue to weigh on recovery prospects, according to the National Bank’s (MNB) latest market report.

Since mid-2024, prime yield growth has halted across all segments, signalling a potential bottoming out of the cycle. However, tepid economic momentum in the H2 2024 failed to translate into a marked uptick in market activity. The pickup in GDP growth in 2025 along with a turnaround on European markets could reduce cyclical risks, according to the quarterly Commercial Real Estate Report.

Commercial real estate investment volume in Hungary fell 28% to €400mn in 2024, in contrast with CEE peers. Domestic investors accounted for 73% of that volume, while foreign capital came primarily from the UK, Germany and increasingly China.

Commercial real estate lending rose 36% year on year in 2024, from a low base in 2023, with two-thirds of volumes tied to construction financing. Apart from offices and hotels, all asset classes recorded an increase in new project lending. While banks tightened credit conditions for offices and logistics in late 2024, they signalled no further restrictions in early 2025. The quality of outstanding loans remains strong, with non-performing ratios still low, and overall exposure moderate in terms of balance sheet and capital metrics

The office sector continues to grapple with the long-term impact of hybrid working patterns that took hold during the pandemic. While some office buildings have been converted into hotels in recent years, new completions are pushing vacancy rates upward. The vacancy rate could reach 15% this year, up from 14% in 2024, though the MNB said this level does not yet pose a systemic risk.

The industrial and logistics segment presents a more resilient picture. Investment volumes reached record highs last year, although subdued demand from Europe’s struggling industrial sector clouds the short-term outlook. Temporary increases in vacancy are expected due to the volume of new deliveries, but the average vacancy rate remained below 8% at the end of 2024.

The hospitality market is benefiting from a post-pandemic tourism rebound. Visitor numbers have returned to pre-pandemic levels, and hotel revenues rose 17% in 2024. The outlook for 2025 remains positive, bolstering investor appetite for new hotel developments, according to the MNB report.