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2022/07/22 / Erste Group Research
CEE Special | House prices to cool down

CEE Special | House prices to cool down

The real estate market is red-hot

The real-estate market is red-hot. House prices have been growing continuously since 2015, reflecting solid economic conditions, as well as the low interest rate environment. Compared to 2015 and as of 1Q22, house prices more than doubled in Czechia and Hungary, with the latter experiencing the biggest increase in real estate prices in the whole region. Romania is on the other side of the spectrum, with house prices growing by “only” 40% since 2015.

Despite the sharp 2020 recession, house price growth did not slow down during the pandemic. Quite the opposite, we have seen accelerating real estate price growth across the region over the last couple of years. The recovery from the pandemic was also quite dynamic, and growth and employment prospects were still very favorable in early 2022. Looking at annual net earnings development compared to house price growth since 2013, as a very simplified indicator of housing affordability, we can see that most CEE countries saw a noteworthy deterioration in recent years. The fact that house prices are more heated is also clear when looking at them via the lens of the Hodrick-Prescott filter.

In quarters to come, the housing market should cool down. So far, surging inflation forced regional central banks to briskly tighten monetary conditions. The key policy rate is currently higher than a year ago by as much as 8.25pp in Hungary, more than 6pp in Czechia and Poland, and 3.5pp in Romania. The cost of credit surged; development that is likely to cool down borrowing.

Furthermore, high inflation will turn the growth of real wages into the negative territory, shrinking disposable income of households. Thus, more consumers expect their financial situation to worsen. More importantly, that share is well beyond levels reported during the pandemic. Finally, a possible recession may worsen labor market conditions.

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General information

AuthorErste Group Research
Product typemonthly/ quarterly
Product nameCEE Economies Special Report
Topic in focusFX, Macro/ Fixed income
Market cap-
AvailabilityAll [1]


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