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Methodology

The FHB House Price Index measures the development of Hungarian residential real estate prices.

The index is updated quarterly, and starts from the first quarter of 1998. The value of the index is normalised with the average for the year 2000, i.e. the average index value in 2000 is 100. The index is based on actual buying and selling transaction data of residential real estate, and was prepared by processing such data from approx. 1,000,000 residential properties located in over 3,000 municipalities from 1998 onwards. The sources of data include the records of FHB itself, as well as a database purchased from APEH, the national tax authority (and from stamp duty offices before 2008).

As not every single property is sold in every quarter, our observations – even if the transaction data are complete - necessarily relate to a restricted sample of the real estate stock, and the sample is not representative. In such cases, the development of simple indicators (average-, median price) is affected by the type of properties transacted in the given period, i.e., by the composition of the sample. When computing the FHB House Price Index, we manage this so called ‘composition effect’ by using the hedonic method, which is widely acknowledged among professionals. The trends of simpler indicators and the FHB House Price Index calculated with the hedonic method are similar, they share the same conclusions in the long term. It can be noted, however, that in the shorter term, the simpler indicators have greater volatility, while the index produced with the regression method has a smoother curve. The hedonic method is therefore more appropriate in demonstrating fundamental processes.

Because the majority of the data sourced from APEH arrives at least half a year later than the transaction actually took place - sometimes even years after the transactions -, values of the index are recalculated if new data arrive, thus they may be subject to subsequent modification.

The methodology of FHB House Price Prognosis is based on a three-pillar model:

I. On the basis of international and local experience, we have identified relations between selected Hungarian macroeconomic indicators, money-market and credit market indices, transactional data of the housing market and housing prices. (We base our view of the development of the macroeconomic and financial environment primarily on the projections of the Central Bank of Hungary.)

II. FHB Banking Group has been one of the major actors of Hungarian housing market financiers for over a decade. Our operations cover the entire country, and we have access to information from the most significant real estate appraisers, which is complemented by FHB Real Estate Ltd’s own professional experience. Our forecasts, therefore, include processed and verified local assessments as well.

III. With respect to the economic crisis, we shall not disregard empirical facts gained from analyses of similar depressions that have affected real estate prices in the past. We have, therefore, included the international experience obtained from similar crises in our model.

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FHB House Price Index

  • House prices are currently at their early 2008 level, barely 1.5 percent below their pre-crisis peak
  • Since April 2014 through end of 2015  residential property prices increased by approximately 28 percent in both nominal and real terms.
  • From  2016  significant  increase is expected in newbuild dwellings due to VAT reduction (from 27 to 5 %). The new  family housing allowance (CSOK) will also stimulate the mortgage market.

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