Tourism and the housing market: further signs of weakness

HUNGARY - In Brief 03 Aug 2023 by Istvan Racz

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Before the June data for industrial output and retail sales, due tomorrow, it may be worthwhile to take a look at two areas of somewhat minor importance: tourism and the  housing market. The monthly available indicator for tourism is the number of guests and nights spent at 'touristic accommodations', including hotels and private houses/apartments rented out to tourists. The number of guest nights fell by 0.8% yoy in June, although it rose by 1.3% yoy in H1. Importantly, the number of nonresident visitors went up sharply, whereas the number of domestic tourists fell by even more. Overall, the number of guest nights spent by domestic visitors dropped by 10% yoy in June and by 8% yoy in H1, reflecting the genuine weakness of domestic demand. There has been a significant shift away from hotels, to the cheaper category of private houses/apartments. Guest numbers looked better, but foreigners, many of whom visit Budapest for a weekend only, usually spend less time on such vacations than domestic tourists. The housing market looks much worse. In H1, the number of newly completed apartments fell by 19.5% yoy, and the number of new housing construction permits decreased by 38.6% yoy. The latter followed an even sharper reduction of new housing loans, the latter having fallen by 68% yoy in May. Curiously, housing prices did not fall in Q1 this year: they went up by 2.3% qoq for used apartments and by 1.6% qoq for new apartments. But the number of housing sale transactions fell by 41% yoy in H1, showing that high offered prices were decreasingly accepted by the buyer side. Please, note that all this is seen after a major appreciation of residential housing over the last ten year...