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S&P Global has flagged real estate overvaluation as an emerging risk for Hungary’s banking sector after a sustained surge in property prices over recent years. House prices in the country have more than tripled since 2015, marking the fastest growth rate in the European Union. Analysts noted that government-backed housing schemes, including low-interest mortgage support, have pushed borrowing levels higher and increased loan-to-value ratios. While no immediate housing crash is expected, concerns remain that weaker economic growth or wage slowdowns could expose vulnerabilities in bank asset quality.
S&P Global has indicated that overvaluation in Hungary’s real estate market is becoming a key concern for the country’s banking system, following sharp and continuous price growth over the past several years.
According to Eurostat data, Hungarian house prices have increased more than three times since 2015, recording the fastest rise across the European Union. The growth trend also included a 21% increase in the final quarter of the previous year, reflecting sustained demand pressures.
The central bank has highlighted that government support measures, including a 3% mortgage scheme for first-time buyers, have contributed to rising borrowing activity. As a result, the average loan-to-value ratio has moved up to 68% from 59%, adding to concerns about overvaluation in the housing market and the possibility of future price corrections.
S&P Global analysts observed that multiple government-backed housing and small business schemes have helped maintain bank asset quality in recent years. However, they also noted that given Hungary’s fiscal constraints, it remains uncertain how long such programmes can continue at current levels.
The agency further stated that while there is no immediate expectation of a housing market collapse, a slowdown in the economy or weaker wage growth could increase pressure on the banking sector and expose underlying risks.
It was also noted that the broader subsidy-driven lending environment does not fully reflect market-based conditions. At the same time, government backing for some of these schemes continues to support asset quality in the banking system.
Beyond housing, S&P Global is monitoring risks in Hungary’s energy-intensive corporate sector, particularly amid rising costs linked to geopolitical tensions involving the Iran war. While current non-performing loan levels remain low, analysts indicated uncertainty over how long this stability can continue.
On governance-related factors, remarks from Prime Minister Peter Magyar’s new government on maintaining central bank independence were viewed positively, as this is an important factor in credit assessments of the banking sector.
S&P Global also suggested that progress towards euro zone accession, along with European Central Bank supervision of Hungarian banks and gradual interest rate convergence, could improve the outlook for the sector.
Reforms related to governance and rule of law were also seen as potential positives, especially given long-standing gaps compared with other Central European economies. An anti-corruption package introduced to meet European Union funding conditions was described as a constructive step, while judicial independence remains an important consideration.
At the same time, analysts cautioned that any aggressive policy actions targeting affiliates of the previous
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