Accepted on Tuesday new economic policy action plan three pillars will determine the government’s actions in the coming years – emphasized the Minister of National Economy on Thursday in Budapest at the Portfolio Budapest Economic Forum 2024 conference.
Márton Nagy recalled: the three pillars are ensuring affordable housing; increasing the purchasing power of incomes; and support for small and medium enterprises (SMEs). in order to launch the Sándor Demján program.
Discounted VAT and voluntary interest rate cap
For a long time, the government was in debt to whether the 5 percent VAT on new apartments will be extendedWednesday’s Government Information showed that it was. In addition, a 5 percent voluntary home loan interest ceiling will be introduced in cooperation with the banking sector, and dormitories will be expanded, announced Gergely Gulyás, the minister in charge of the Prime Minister’s Office.
Gergely Gulyás, Minister in charge of the Prime Minister’s Office, and Government Spokesperson Eszter Vitályos at the Kormányinfo press conference in the Prime Minister’s Office building on October 16, 2024
Image: MTI, Szilárd Koszticsák
In May of this year, Mihály Varga announced in a Facebook post that the deadline for the discounted housing VAT would be postponed. Until December 31, 2026, newly built apartments (up to 150 square meters) and family houses (up to 300 square meters) will only be subject to a 5 percent VAT rate.
The Minister of Finance explained that it is an additional relief that the reduced tax rate can be applied until the end of 2030 in the case of properties whose building permit and notification were made by the end of 2026. On the other hand, Mihály Varga’s post was followed by silence for months, it was not known when the bill would finally be presented to the Parliament.
Five percent housing VAT – Is the government really playing this?
In May, the Minister of Finance announced another two-year extension of the discounted 5 percent housing VAT, but since then the relevant bill has not been submitted to the Parliament. The expert does not consider it likely that the measure will not be extended, as this would significantly reduce housing construction.
The decision was probably made earlier, but it has not yet appeared in legislation.
The saying that a promise is a nice word is probably valid here, but if it is kept then it is even better, especially if it is enshrined in legislation, because in the middle of October, housing developers could also be worried about whether or not the discounted housing VAT will really be extended.
– stressed the leading economic expert of Ingatlan.com in response to Economx’s interest, since “if it had not been extended, it could have caused quite an unpleasant surprise for the apartment developers”.
László Balogh sees it as: speeding up housing construction and revitalizing the real estate market can serve several purposes. It can help the population’s goals related to real estate, plus it can effectively contribute to economic growth. In this way, the government can combine the pleasant with the useful.
According to the plans published in the National Housing Strategy 2035 document, the goal is for the number of new housing constructions to reach 25,000 to 35,000 per year.
For this, on the one hand, it is necessary to stimulate the demand for new apartments, for example with favorable interest rate loans. One of the tools for this can be a 5 percent home loan. And the other leg, which must be carried in parallel with this, is the 5 percent housing VAT, which in turn can strengthen the supply
explained László Balogh.
At the end of September, Minister of National Economy Márton Nagy agreed with the Banking Association about the 5 percent voluntary interest ceiling for home loans. They then agreed that the banks would figure out how to implement this request within two months.
The leading economic expert believes that this is important due to two important factors:
- if the banks voluntarily undertake this interest rate ceiling, it may accelerate the interest rate reduction trend that has been taking place continuously in the market since the beginning of 2024;
- practically six percent is the psychological limit at which, with a lower interest rate, the population’s willingness to borrow jumps.
This is important because real estate prices are now at such a level that a loan is needed for every second real estate purchase, so if lending conditions improve, it can also stimulate the real estate market.
“We saw that many people postponed sales, especially in the first half of last year, because the economic environment was worse compared to the beginning of 2021/2022. At the beginning of 2023, parallel to inflation, interest rates on home loans also skyrocketed. At that time, banks issued offers of 10-12 percent to prospective property buyers, and now bank loan interest rates for home loans are already around 5.9-6.3 percent” – emphasized László Balogh to our paper, according to whom the big question is what the banks will undertake, since their cost of funds is relatively high, and the interbank interest rates are still above five percent.
Maybe in the first round, they can only enforce this maximum 5 percent home loan interest in a targeted manner. For example, young people buying their first home or energy-efficient, green lending are included in this loan range
– said the expert, at the same time drawing attention to the fact that there are still many questions, the government information also said that the negotiation is in progress. With regard to the two-month deadline, they calculate that since the proposal was made at the end of September, the interest rate cap may be valid from January 2025.
The government is reaching into the pension funds, the real estate market may explode
The Minister of National Economy made it clear in the past few days: the great lesson of the past period is that, after overcoming inflation, reducing food inflation and increasing real wages, building a home is more important for the population than starting consumption.
According to Márton Nagy’s announcement, next year the savings accumulated from personal and employer contributions, as well as some of the returns and state tax credits, can be used tax-free in the voluntary pension funds for housing purposes and renovations related to housing.
Based on preliminary calculations, 200-300 billion forints can move
– announced László Balogh, noting at the same time that this is interesting because the total annual turnover of the housing market, if the value of all sold apartments is taken into account, was about HUF 4 thousand billion in 2022, and almost HUF 3 billion in 2023.
“This HUF 300 billion represents 10 percent of this, but it must be added that this will not primarily be used for home purchases, but for home renovations that are also among the beneficiary goals, which is already a significant amount, considering that an average volunteer pension fund savings on these accounts can be around HUF 2-3 million,” added the expert.
We show you a list of what kind of home renovations pension money can be used for
The draft legislation has been published, which regulates in detail what and how savings in voluntary pension funds can be used tax-free for housing purposes in 2025. Based on this, it became clear what kind of home renovation works can be carried out with this money.
Source: www.economx.hu
