Hungarian Prime Minister Viktor Orban is betting on housing stimulus to revive the economy after the COVID-19 slump, but an inexorable rise in prices is squeezing many first-time buyers out of one of Europe's hottest property markets.
Measures in favour of the hous
Hungarian Prime Minister Viktor Orban is betting on housing stimulus to revive the economy after the COVID-19 slump, but an inexorable rise in prices is squeezing many first-time buyers out of one of Europe's hottest property markets.
Measures in favour of the housing sector include lowering VAT on housing to 5%, as opposed to Hungary's standard rate of 27%. The government is also giving away grants worth around $10,000 for home renovations. Housing market professionals say that is likely to lift prices by driving up demand for construction materials and labour. Since 2015, Hungary has experienced the second steepest rise in house prices of all 37 members of the Organisation for Economic Co-operation and Development (OECD), after Luxembourg.The trend has been driven by generous subsidies for families to buy a new home, interest rate cuts fuelling demand by investors, a shortage of construction labour and rising materials costs. The Hungarian central bank says Budapest now ranks fourth worst among European capitals in housing affordability, behind Paris, Prague and Bratislava.Housing experts say the average price of new flats in Budapest could reach 1 million forints ($3,300) per square metre over the coming months, double its level five years ago. The average monthly take-home pay was 284,100 forints in February.Economists say the construction sector will be one of the main drivers of Hungary's recovery from the pandemic. Analysts at Takarekbank say construction output could rise by 13% this year and 8.2% in 2022 after last year's 9.1% slump. Peter Virovacz, an economist at ING, said Orban's housing measures could boost economic growth by up to one percentage point. The government sees growth at 4.3% this year and over 5% in 2022.