Commentators do not expect the property market to collapse, however. Balazs Kristof is selling a third-floor flat in Miskolc for HUF5.4m. "I've got the deposit, and I really hope the buyer pays the purchase price as well," he said the young man, who is somewhat peeved that a similar flat in the same street sold for HUF6m.

There's surplus supply not just on that street, but throughout the lower and upper segments of the housing market as well. Unemployment is driving people away from the villages of Somogy county, but even houses there in a good condition take two or three years to sell, said Ms Janos Sipos, an estate agent in Tamas. Three-room, centrally heated flats sell for HUF5m. Further on, in the picturesque valley of Nagyszekely, houses can be bought for HUF200,000, and not even the most expensive houses cost more than HUF1m. There's plenty of supply, little interest, and buyers are nowhere to be found. Sellers at the premium end of the market are doing little better.

Viranyos in Budapest's 12th district is one of the most elegant neighbourhoods in the capital. There, a doctor is prepared to sell for HUF175m a luxury villa set in 1300 square metres of land which he bought for HUF260m three years before. An elderly man who recently returned home from the Netherlands is selling a similarly luxurious house on the sunny side of the Rozsadomb hill for HUF135m. He wanted HUF170m last year. The largest property website, ingatlan.com, reports that advertisers are now only changing their asking prices downwards. Three years ago, advertisers frequently raised their asking prices.

Pal Baross, a director at ING Hungary Property Investors, said: "The value of existing property is following all over the country, and this will continue for some time." New-build properties are not doing much better. "In the former industrial areas of Budapest, the 11th and 9th districts, as well as Kobanya and Angyalfold have been the mass markets of recent years. Identical flats, identical qualities: these developments were designed for the man on the street. But the man on the street did very badly out of the tightening up on cheap credit deals at the end of 2004. Prices in new housing developments have been stagnant since then," said David Valko, head analyst at Otthon Centrum, the largest property dealer in the country. Until the credit squeeze, even rental income was enough to pay of the loan. This is far from the case nowadays. Back then, bank surveys suggested that 15 per cent of buyers in the capital were buying purely for investment purposes.

Prices are falling on the Danube Bend as well. An assistant physiotherapist in Szentendre bought a HUF3m plot of land five years ago. Even if she manages to sell it for HUF3.5m now, she'll still lose

15 per cent in real terms. She's likely to love more, since the plot has been on the market for two years, attracting a grand total of five expressions of interest. A Visegrad estate agent said: "The market is stagnant throughout the Danube Bend," adding that he would be dying of hunger if he didn't sell insurance as well. Some sellers are sticking to their original prices, but some are giving in. The estate agent

continued: "In Kismaros, a client of mine dropped the price of a good plot of land suitable for development from HUF8m to HUF5m overnight. He's finally found a buyer."

Prices on the Danube Bend have been driven down by the oversupply of holiday homes, just as has happened around Lake Balaton, but the effect has also extended to primary residences. Some areas around Buda are suffering from traffic problems as their real value declines. The mayor of Nagykovacsi said: "Even though we're only 6km from the edges of the city, reaching Deak ter can take 60 to 80 minutes in the rush hour, whatever your means of transport." She believes many of those who moved out will head back into the city within six months. Yet back in 1999, when the American School moved to Nagykovacsi, many expected the foreigners to arrive, driving up the prices. But the story is the same, just as in Budakeszi, Paty, or Zsambek - where the 'for sale' signs are sprouting up everywhere.

Over the years, Ms Ludvigh Laszlo has built up an impressive database.

She believes prices may fall by more than average in Budakalasz, some parts of Buda, in parts of the Pest district of Zuglo and in Central Pest, where foreign demand has driven prices up the most. Some of them are already turning their attention to Bucharest and Sofia. The market drivers are very different in northeastern Hungary or in parts of Heves county, where a local estate agent told us that people alarmed by the arrival of Roma are selling their houses ever more cheaply.

Zoltan Heves of the Central Statistical Office, says, however, that in more economically depressed regions like Szabolcs and Borsod counties, in large parts of Nograd county and in the area between Pecs and Lake Balaton, the property market has been stagnant since 1989.

Estate agents live off the cut they take from sales, and so they naturally try to persuade sellers to sell more cheaply. Andras Caspo, who runs the Gyor branch of estate agency Duna House, said: "You can sell plenty of flats in Gyor, you just have to take the price down."

People are asking HUF11m for council flats that will sell for a maximum of HUF7-8m. He added: "People are coming to Gyor from eastern Hungary. People are coming from everywhere from Miscolc to Kecskemet.

But they'll pay no more than HUF10m for a flat."

While some are leaving Kecskemet, others are tempted by the continuously falling property prices in the city. One postman is moving to the city from Kiskunfelegyhaza, tempted by the fact that a 50 square metre flat that cost HUF8-9m last year is now selling for HUF7m.

Csaba Szabo, head of another property company, claims that the market is depressed because of a flood of misguided attempts at entering the estate agency business. "People who sold cars decided to move into property development. But they didn't understand the market. They bought bad plots, used low-quality contractors, they got into a mess.

Those flats are now selling at much lower prices," he said.

Profits at the country's largest property developers have fallen from 50 per cent a few years ago to 10 to 12 per cent today. At the turn of the millennium, there was a mad rush to buy up land and develop properties, now companies are drawing up detailed business plans.

Banks estimate that there are some 5,000 empty new flats in Budapest, while some 500 apartment blocks are still being built, with almost 30,000 flats to come on the market in the next couple of years. The invisible hand is at work. David Valko says: "The developers aren't their own worst enemies. They're postponing investments, reducing sizes." A few years ago, developments of 400 flats were common. Now, developers are building in phases, proceeding to the next phase only if the first 100 or 150 flats sell.

Laszlo Geza Tilk, a property market analyst, says: "The price movements are one part of the story. The other is the fact that turnover on the property market is falling dramatically." His statistics show that in the first quarter of 2006, 60 per cent fewer flats changed hands in the capital than last year, and experts expect forthcoming data on the regional property market to show a similar tendency.

There are numerous reasons for this sclerotic market. Denes Varga, of the economics consultancy DEM, says: "In 2002 and 2003, two or three times as many families as usual - a million in total - decided to move house, partly because of attractive loan conditions." He added that families who bought recently are unlikely to repeat the trick.

Especially now that conditions are less favourable. "If the chemicals industry was regulated like the property market, then factories would explode daily," Varga fumes, saying: "Orban's government should have put a stop to cheap credit, but his successor Medgyessy kept right on with it. Since the tightening came too late, the breaks had to be applied too hard in 2004."

Half a million people took out a house loan between 2000 and 2005.

Asset-backed loans, which stood at 2 per cent of GDP in 2000, have since grown fivefold. "Development was so fast that it had to slow down," claims Laszlo Harmati, deputy CEO of FHB bank. "And what do you see? While in the first half of 2004, some HUF70bn a month flowed to the population in mortgages, that figures has shrunk to HUF40bn."

How the government's budgetary tightening will affect the property market remains to be seen. DEM expects real incomes to shrink by 5 to 10 per cent next year, leading to an even greater fall in disposable incomes. People will be spending much more careful. Istvan Daroczi, owner of a Debrecen estate agency, said: "It's enough to visit a second-hand car dealership and see how many cars sit waiting and how many buyers. If there's nobody, then there are no house buyers either." He added that 1000 new flats stood empty in Debrecen, and sellers were progressively cutting their asking prices.

Hungarians tend to escape into property in an uncertain economic environment. Raymund Petz, an analyst at GKI Economics, said: "The belt-tightening may have a short-term positive effect on the market because it is still possible to buy property on subsidised credit this year. So there may be people who choose to buy this year."

Other expect signs of life to follow from new leasing opportunities, though few have yet taken advantage of them, HVG understands. Others expect 100 per cent bank loans to do the trick. Though debt levels are rising fast, analysts think there is still room for growth: mortgage debt as a percentage of GDP in Hungary is at less than a fifth of the level in the old EU member states.

Prices are rising in areas with significant growth. In Dunaujvaros, for example, estate agents have seen growth as a result of large South Korean investments. Similar effects may manifest themselves in Northern Transdanubia. But there is little point in awaiting miracles:

we have already joined the EU once, foreigners buying property in larger towns are unlikely to push up prices in the short term, and Hungarians' purchasing power is also unlikely to grow much.