The ‘Superbond’ Cooling the World’s Hottest Real Estate Market

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(Bloomberg) -- Dubbed the “superbond,” an initiative by Hungary’s government is taking the edge off the world’s hottest property market.

The state-backed debt instrument, officially called MAP+, pays out an average of almost 5% a year and was rolled out to trim a reliance on foreign creditors who’ve exacerbated past crises by fleeing at the first sign of economic strife.

With real interest rates stuck below zero, uptake in MAP+ -- which is sold exclusively to households and is exempt from tax -- has been strong: the equivalent of $10.5 billion has been invested since its launch last June.

That diverted cash from real estate at a time when prices on Budapest’s residential market were -- according to Knight Frank -- surging more than anywhere else on the planet.

The ‘Superbond’ Cooling the World’s Hottest Real Estate Market

“MAP+ has had a big impact on the housing market,” said Karoly Benedikt, head of research at Duna House, one of Hungary’s biggest realtors. “Before MAP+, there was simply no alternative to real-estate investment.”

It wasn’t long before the bond’s effect was felt. Retail-property transactions plunged an annual 56% in the third quarter of 2019 -- the first period when Hungarians could invest in MAP+. The country’s housing-price index posted its first quarterly drop since at least 2015 in that same period.

The ‘Superbond’ Cooling the World’s Hottest Real Estate Market

Some may welcome the cooling. Hungarian property prices have jumped 60% in the past four years, the most in the European Union. Finance Minister Mihaly Varga described a “bubble-like” market while central-bank Governor Gyorgy Matolcsy has urged a rethink of what he calls a failed national housing policy.

And it’s not just the “superbond” at work, according to Duna House’s Benedikt, who points to a slower-than-expected uptake of state subsidies and predicts the market will stagnate in 2020.

There’s also plenty to suggest real estate will take off again.

Average wages grew by more than 10% for a third year in 2019 and the government is considering further measures to help families buy homes. Meanwhile, property prices remain higher in the nearby Czech Republic and Poland -- indicating room to rise further.

©2020 Bloomberg L.P.

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