OeNB Report 2025/14: CESEE Property Market Review

Housing market trends in the fourth quarter of 2024 and the first quarter of 2025

Antje Hildebrandt

OeNB, Central, Eastern and Southeastern Europe Section, antje.hildebrandt@oenb.at .

In EU countries of Central, Eastern and Southeastern Europe (CESEE), house prices rose dynamically on average in 2024 and early 2025. This was supported by generally favorable macroeconomic conditions and lower housing loan costs. As a result, demand for housing increased across the region. Besides general regional trends, country-specific factors also mattered. For example, in some countries government policies had an impact on housing market activity in CESEE.

Highlights

1 House price growth rebounded in the CESEE ¹ countries ²

After house price growth ³ in the CESEE region decelerated to around 6% (GDP-weighted average) in 2023, it accelerated in 2024, with nominal growth surpassing 10%. Bulgaria, Croatia, Hungary, and Poland recorded above-average growth rates, while Czechia, Latvia, Romania, and Slovakia showed the slowest growth dynamics, with growth below 5%. However, Czechia and Slovakia rebounded in 2024 compared to 2023, with growth increasing by 6 and 4 percentage points, respectively. Although house prices also recovered significantly in the euro area, CESEE house price growth remained comparatively stronger in 2024 (chart 1).

Quarterly data indicate that nominal house price growth in the CESEE region (GDP-weighted) decelerated in Q1 25, declining from 9.6% in Q4 24 to 8.2% year-on-year. This moderation was mainly driven by weaker price dynamics in Bulgaria, Hungary, Poland, and Slovenia. In contrast, house prices continued to increase in Czechia, Croatia, and particularly Slovakia, where growth accelerated by over 4 percentage points. Compared to 2022 – a period marked by very low interest rates – annual house price growth in Q1 25 was considerably lower in all CESEE countries except Bulgaria.

Chart 1

Quarter-on-quarter house price growth in Q1 25 was highest in Hungary (+5.2%), followed by Croatia (+4.5%) and Bulgaria (+4.2%). In the Baltic countries, Estonia and Latvia returned to positive quarterly growth, reversing declines seen in Q4 24. In contrast, Slovenia experienced a sharp downturn, with growth falling to –2%, down from 2.1% in the previous quarter.

Aggregated house price data, as shown above, provide valuable insights into the overall trajectory of a country’s housing market. However, housing market dynamics can vary significantly within countries, depending on factors such as housing conditions and location.

For the euro area, Höynck et al. (2025) analyze house price developments based on housing characteristics (existing vs. new dwellings) and location (capital cities vs. other regions of countries). They find that prices for existing dwellings increased somewhat more sharply than those for new ones during the pandemic, likely due to limited supply of newly built housing amid subdued construction activity and changing buyer preferences (e.g. larger homes in more affordable areas). During the subsequent slowdown in growth, prices for existing dwellings declined markedly as preferences normalized and rising energy costs made new dwellings more attractive. Moreover, prices for new dwellings remained elevated or even surged due to high construction costs.

Some CESEE countries exhibit similar patterns in the price dynamics of existing and new dwellings (chart 2), with prices for existing homes rising more sharply than those for new constructions during the pandemic, followed by a stronger downward correction. This trend was, for example, observable to some extent in Poland, Romania, and Slovakia. Notably, house prices for newly constructed dwellings increased during the subsequent upswing in several CESEE countries, such as Bulgaria, the Baltics, Poland, and Romania, largely due to substantially higher construction costs and increased demand for new buildings amid soaring energy prices. It is also worth noting that the growth of total and existing house prices largely moved in parallel, reflecting the dominance of existing housing in overall market transactions.

Chart 2

When focusing on housing location, house prices in capital cities are generally higher than in other parts of the country, especially compared to rural areas. This disparity is driven by several factors, including strong housing demand, more affluent buyers, limited space and supply in urban centers, speculative investment — both domestic and foreign — concentrated in capital cities, as well as the use of properties for short-term tourist rentals. Regional data for CESEE countries provided by Numbeo ⁴ confirm this pattern: In all capital city centers, apartment prices consistently exceed those in other regions. Prague ranks as the most expensive city for apartment purchases, followed by Warsaw, while prices in the capital cities of Latvia (Riga), Bulgaria (Sofia), and Romania (Bucharest) are significantly lower. Outside the capitals, including secondary cities and non-central urban areas, prices are substantially lower (chart 3).

Chart 3

Turning to regional house price dynamics, Höynck et al. (2025) show that in the euro area, price dynamics have become more aligned between capital cities and national averages, unlike in the pre-pandemic period, when price increases were generally stronger in capitals. Pandemic-driven changes – such as remote work, demand for more space, and greener surroundings – shifted housing demand towards more affordable housing in more rural areas. Several CESEE countries exhibit similar patterns, according to regional house price data from the BIS Data Portal . However, cross-country comparisons remain challenging, particularly due to differences in how urban agglomerations are defined. Hungary stands out as a notable example: Prior to the pandemic, house price growth in the capital significantly outpaced that in the rest of the country. However, from mid-2020 onward, this pattern reversed, with stronger price growth occurring outside the capital – until prices in Budapest began to recover from mid-2022. Similar trends, though less pronounced, were observed in other CESEE countries, including Bulgaria, Czechia, Estonia, and Croatia.

2 Easing of financing costs boosted housing demand

Housing demand and market activity increased across the CESEE region, driven by a combination of factors. Despite some weakening of consumer confidence in several CESEE countries during the reporting period, overall sentiment remained relatively high, supported by rising real incomes — partly due to lower inflation — and a favorable labor market environment. In Romania, however, consumer confidence declined sharply, largely due to political uncertainty (chart 4). ⁵ The overall positive picture in the CESEE countries coincided with easing financing conditions (see below) and pent-up demand, as many households had postponed home purchases in 2022 and 2023, primarily due to higher financing costs. In some CESEE regions (e.g. the Adriatic coast and capital cities), foreign investors influenced housing demand. In Croatia, however, the share of non-resident house purchases by value fell to around 13% in 2024, down from a peak of about 20% in 2021 and 2022. Expectations of rising house prices, the perception of housing as a stable investment, and country-specific factors have also contributed to increased demand. In Bulgaria, for example, the anticipated euro area accession in the coming months appears to be fueling housing demand – likely for reasons similar to those observed in Croatia, such as growing interest from foreign investors and concerns over further price increases. In Hungary, substantial excess savings – stemming from high interest earnings on domestic government bonds and voluntary pension funds – have been redirected into the housing market (Magyar Nemzeti Bank, 2025a).

Chart 4

Financing costs for housing have eased since peaking in 2023–2024. In CESEE euro area countries, interest rates for housing loans fell most sharply in the Baltic states – from around 6% in 2023/2024 to around 4% in Q2 25. Non-euro area peers experienced even more pronounced changes, particularly Hungary, where rates declined by about 4 percentage points since peaking in the beginning of 2023. In Bulgaria – the only CESEE EU country operating under a currency board arrangement – financing costs remained low over the last years (chart 5).

Chart 5

3 Housing loan growth continued to increase

In contrast to the varied developments in house price dynamics across countries, housing loans rose rather uniformly in all CESEE countries with one exception. Compared to the end of 2023, housing loan growth had accelerated noticeably by the end of 2024, and the dynamic recovery continued in the first half of 2025 (chart 6), primarily driven by monetary easing (see above). Bulgaria consistently recorded annual housing loan growth rates of around – or even exceeding – 20%. Double-digit growth in housing lending was also observed in Croatia, Estonia, Hungary, Lithuania, and Romania during the first half of 2025. Poland was the exception, showing a moderation in loan growth, largely due to the phasing out of previous policy measures – including the subsidized mortgage scheme with a 2% interest rate, the expiration of the credit holiday program, and a wave of early repayments. In Croatia, the termination of its housing loan subsidy program also contributed to a gradual slowdown in lending activity. In Hungary, a subsidized loan for workers was launched in 2025, with half of the volume under this scheme consisting of housing loans (Magyar Nemzeti Bank, 2025b).

Central banks in the CESEE region reported rising housing loan volumes, largely driven by increasing property prices, which reflect a growing need for financing. In Croatia, for example, the average value of new housing loans rose from EUR 100,000 in Q4 23 to EUR 120,000 in Q4 24 (Croatian National Bank, 2025). According to the Magyar Nemzeti Bank (2025a), the average contractual amount for market-based loans in Hungary reached HUF 19.8 million for used homes in February 2025, up from HUF 15.6 million in February 2024. For newly built homes, the average loan amount increased to HUF 27 million, compared to HUF 24 million a year earlier.

Chart 6

In 2024, the average annual change in new housing lending was positive across the region, except in Croatia. This is particularly noteworthy given that growth was negative in 2023 in all CESEE countries, except Poland, where housing loan subsidies had boosted lending. According to the latest data (Q2 25), the annual change in new housing loans was positive in all countries ⁶ , with the fastest increase in Croatia, while growth momentum turned negative in Bulgaria, Czechia, Estonia, and Poland.

CESEE countries show considerable variation in financial intermediation, as measured by the ratio of housing loans to GDP. In Q1 25, the highest levels were recorded in Estonia and Slovakia, both exceeding 30%, while Romania reported the lowest level, at approximately 6%. According to the National Bank of Romania (2025), this low level of financial intermediation is partly attributable to the prevalence of cash-based property transactions. Recent data (January–March 2025) indicate that only around 40% of housing transactions in Romania were financed through loans.

Following a period of sluggish growth, house prices and housing loan volumes in the CESEE region have bottomed out, with housing market activity now showing strong momentum. Against this backdrop, central banks in the CESEE region are closely monitoring housing market developments, and macroprudential authorities have a range of tools at their disposal to address emerging imbalances – as has been the case over the past decades. ⁷ Regarding changes to borrower-based measures, the Bulgarian National Bank, for example, introduced limits for new and renegotiated housing loans: a loan-to-value ratio of 85%, a debt-service-to-income ratio of 50%, and a maximum loan maturity of up to 30 years. ⁸ The measures have been effective already since October 1, 2024, introduced in response to elevated credit growth, household indebtedness, and property overvaluation. Croatia implemented tighter lending standards in July 2025. Under the new rules, the debt-service-to-income ratio is capped at 45% for housing loans and 40% for non-housing loans, while the loan-to-value ratio must not exceed 90%. A maximum maturity of 30 years applies to both housing and non-housing consumer loans secured by real estate. On a quarterly basis, banks are permitted to issue up to 20% of their housing loans above the debt-service-to-income threshold (Croatian National Bank, 2025).

4 Housing affordability remains a key issue in CESEE countries

Concerns about housing affordability are present in all CESEE EU countries. Over the last decade, real house prices have accelerated in all CESEE economies (chart 7), with Hungary experiencing particularly strong increases. Romania stands out as a notable exception, with prices following a downward trend since 2021. While rising house prices naturally reduce housing affordability, the development of real house prices alone is not a sufficient indicator of housing affordability. Various approaches exist to assess affordability more comprehensively (see OECD, 2021 for a discussion on this topic). A straightforward and commonly used indicator is the development of the price-to-income ratio, which reflects how house prices have evolved relative to income (chart 8). Between Q1 24 and Q1 25, the price-to-income ratio deteriorated significantly in Czechia, Hungary, and Slovakia, driven by house price increases which outpaced income growth. In contrast, affordability has recently improved visibly in Poland and Romania, where robust income growth offset rising house prices.

Chart 7

Chart 8

As discussed above, house prices vary significantly both across and within countries. The same applies to affordability, which is influenced not only by differences in house prices but also by variations in income levels, with average incomes being generally higher in capital cities than in rural areas.

Looking at regional price-to-income variations, data provided by Numbeo shows that housing is least affordable in Prague, Bratislava, and Ljubljana, while Sofia and Riga rank highest in terms of affordability (chart 9). In all CESEE countries – except Croatia, and to a lesser extent Hungary and Latvia – housing is less affordable in capital cities than in other regions of the country. In Croatia, house prices are strongly driven by high demand from both domestic buyers and foreign investors along the Adriatic coast, which continues to drive prices up outside the capital.

Chart 9

So far, affordability measures have focused solely on house prices and income, overlooking the fact that most housing transactions are financed through loans and that lending conditions also affect housing affordability. Regional disparities are evident in this context as well, as illustrated by the price-to-income ratio. In Czechia, for example, the risk associated with loan-financed housing varies by region due to differences in income levels and property prices. Accordingly, households with median income in Prague and Brno face a higher risk of default compared to those in other parts of the country when purchasing a house with a loan (Czech National Bank, 2025). In this context, the Mortgage Affordability Index, which measures monthly mortgage payments as a share of net family income, provides information on how the affordability of loan-financed housing varies both across and within countries. Differences are substantial throughout the CESEE region (chart 10). Housing affordability is lowest in Czechia, Poland, and Hungary, and highest in Bulgaria and Latvia. Within countries, loan-financed housing is less affordable in capital cities than in other regions. A notable exception is Croatia (and to a lesser extent Hungary), where housing is visibly less affordable outside the capital. In Croatia, this outcome is largely driven by strong housing demand – and consequently higher property prices – in the country’s coastal tourist regions.

Chart 10

To improve housing affordability, most CESEE countries have introduced policy measures, often targeting specific groups such as young families or young people. ⁹ Hungary launched a new initiative on September 1, 2025, called Otthon. Under this subsidized housing loan program, borrowers can take out loans of up to HUF 50 million for a maximum of 25 years, with a 10% down payment and a fixed interest rate of 3%. Compared to earlier housing policy measures, eligibility criteria are much more relaxed: Applicants must have paid social security contributions for two years and have a clean criminal record. Family status or age limits – previously required under earlier support programs – are no longer relevant. Moreover, price caps apply: HUF 100 million for flats in multi-dwelling buildings and HUF 150 million for detached homes, aimed at preventing further acceleration in house prices. ¹⁰ Notably, the fixed interest rate of 3% is well below the market interest rate for housing loans (chart 5). Apparently, the effectiveness of price caps may vary by location, as house prices in capital and urban centers are generally significantly higher than in rural areas (see above). Against the backdrop of strong house price growth, the IMF (2025) suggests that reducing housing subsidies would be more effective in easing price pressure. In Croatia, first-time home buyers under the age of 45 have been eligible for tax relief and refunds on newly built housing since January 2025 (Croatian National Bank, 2025). It is also worth mentioning that the European Commission has proposed to address housing affordability in the upcoming Multiannual Financial Framework 2028–2034. ¹¹

5 Insufficient housing supply in the CESEE countries

Housing markets in the CESEE region continue to suffer from a persistent supply shortage – a challenge that has become even more pronounced amid renewed growth in housing demand, which inevitably puts upward pressure on prices. Given the relatively low quality of the housing stock (European Bank for Reconstruction and Development, 2023) and the high proportion of people living in overcrowded households, residents are not only seeking new housing but also aiming to upgrade their living conditions – particularly in terms of space, energy efficiency, and overall quality. This helps explain why housing demand remains strong, despite the region’s exceptionally high homeownership rates. Renting would be a viable alternative to buying, especially for financially constrained households. However, as highlighted in OeNB Report 2024/15 , rental markets in CESEE are generally underdeveloped and unable to absorb housing demand. Moreover, the share of housing rented out below market rates is lower in CESEEE countries than in the EU – except for Poland ¹² – which makes housing even less affordable for many households (chart 11).

Chart 11

To tackle the housing shortage, measures have been implemented or are planned to expand housing supply and make buying or renting more financially accessible for households. ¹³ In Latvia, for example, the Housing Affordability Fund was established in 2022 to channel public resources into the construction of rental housing (OECD, 2023). In Croatia, under the National Housing Policy Plan (running until 2030), efforts are underway to activate a large number of vacant housing units – both publicly and privately owned – for affordable rental purposes. New initiatives also aim to revitalize underdeveloped areas, including a public building program for affordable housing, available both for rent and for purchase.

To illustrate short-term trends in housing supply, charts 12 to 14 present supply-related indicators, including construction confidence, construction output, and building permits. Key events over the past five years, namely the COVID-19 pandemic and Russia’s war of aggression against Ukraine, are clearly reflected in construction sentiment (chart 12). While the pandemic had a broadly uniform and strong impact on the construction sector across CESEE countries, the effects of the war have been more uneven, influenced by factors such as exposure to Russia and differences in the size of national construction sectors. Looking at recent developments, construction sentiment has either improved or remained high in most CESEE countries, supporting ongoing construction activity.

As for construction output, building activity continued to rise in several CESEE countries, with particularly strong growth observed in Croatia, while a modest recovery persisted in Estonia and Slovakia (chart 13). Overall, the construction sector continued to face high and rising costs — both for building materials and wages – amid a persistent labor shortage, which remained a key constraint on the construction of newly built housing. In Slovenia, for instance, construction costs for new housing were more than 30% higher in Q4 24 compared to the average cost in 2021 (Banka Slovenije, 2025).

The issuance of building permits – a key indicator of future housing supply – developed unevenly across CESEE countries (chart 14). Most countries in the region reported low levels of permit issuance, particularly Slovakia, as well as Hungary and Romania, although a modest uptick has recently been observed in the latter two. By contrast, Bulgaria, Croatia, and Slovenia showed positive developments in permit issuance, but have recently experienced a slight slowdown.

Chart 12

Chart 13

Chart 14

References

Banka Slovenije. 2025. Financial Stability Review . April 2025.

Barmeier, M., Eller M. and R. Martin. 2025. Navigating through high-interest environment: macroprudential policy in CESEE . SUERF Policy Brief No 1210. July 2025.

Croatian National Bank. 2025. Financial Stability 26 . June 2025.

Czech National Bank. 2025. Financial Stability Report . Spring 2025.

European Bank for Reconstruction and Development. 2023. Transition Report 2023-24 . London.

Höynck, C. Roma, M. and K. Schlieker. 2025. Developments in the recent euro area house price cycle . In: ECB Economic Bulletin Issue 2/2025.

IMF. 2025a. Hungary: Staff Concluding Statement of the 2025 Article IV Mission. June 2025.

IMF. 2025b. Poland: Country Report No. 2025/006 . January 2025.

Lietuvos Bankas. 2025: Financial Stability Review . June 2025.

Magyar Nemzeti Bank. 2025a. Housing Market Report . May 2025.

Magyar Nemzeti Bank. 2025b. Financial Stability Report . May 2025.

Národná Banka Slovensaka. 2025. Macroprudential Commentary . June 2025.

National Bank of Romania. 2025. Financial Stability Report . June 2025.

OECD. 2021. Overview of Affordable Housing Indicators . OECD Affordable Housing Database.

OECD. 2023. Strengthening Latvia’s Housing Affordability Fund. OECD Publishing. https://doi.org/10.1787/84736a67-en .