Here’s how Matolcsy’s new miracle weapon can affect home prices

According to the central bank governor, the current strong demand is not meeting an equally strong supply in the housing market, either in terms of volume or spatial structure, so a supply change is needed.

The previous reduced VAT rate increase was a wrong move, further weakening the supply side, so in the current system, the housing policy produces inflation and does not create a new home.

The essence of the “New Home Program”

• It would only support green home construction with a 0 percent loan that home builders and buyers could get. However, due to the stricter energy efficiency requirements, this would essentially affect the homes to be built in the future.
• In addition to families, the construction would also offer resources to real estate developers, with roofs.
• It could have a maturity of ten years, so it would not yet burden the central bank’s balance sheet in the long term.
• The total resource requirement could be divided between the central bank and one’s own, family, friends, other bank resources and government subsidies.
• During the evaluation process, the prequalification of participants in the financial system can be used, whereby the central bank can pay a fee.
• State grants (like CSOK in Hungary), savings and other financial resources are taken into account in the credit assessment.
• The prequalification of financial service providers cannot take more than 5 days, the decision of the central bank within 5 hours, and the money transfer cannot take more than 5 seconds.
• The effective use of customer data requires complete and reliable credit information systems.
• The central bank source would provide an insurance contract instead of a mortgage.

With all this, he said, 30 to 40 thousand new homes could be created, strong support for demographic change, annual GDP growth of 1 percent and 40 to 50 thousand new full jobs.

1117 Budapest, Buda-part tér

Effects of the housing market

The national housing market faces serious challenges in several respects. Partly due to the abolition of the 5 percent VAT, the number of announced home improvements has dropped significantly, which will likely be alleviated by an extended support system for rusted areas, but until we know the details, developers will expect big. advertisements.

As can be seen from the Budapest Housing Market Report figure, under current conditions, housing projects can hardly be expected after 2021, although they should have been announced due to the 2- to 2.5-year lead time. In addition, the lack of development is problematic not only because a wealthy stratum cannot afford a house, but also has negative effects such as the decline of related industries (construction, interior design, interior design) or the aging of the housing stock with all its environmental and cost impacts. together. Therefore, we would be interested in having more offer than is currently expected, which is also the objective of the current program.

Demand and supply

Therefore, the MNB’s proposal is basically twofold: as a result of the financial assistance provided to developers, the supply may increase, while the cheaper and better resources offered to customers may strengthen demand. The question arose of what effect this might have on prices. In this regard, it is worth going back to 2015-16, when the introduction of the CSOK and the discounted housing tax gave a big boost to the new housing market. At that time, many expected the supply to increase with low prices during the crisis due to discounts, but in reality, not only the number of housing developments but also prices started to rise significantly.

1117 Budapest, Budafoki út 215.

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However, the current situation is different. Currently we are not in the middle of a crisis with low base values, on the contrary, after several years of rising, construction costs and house prices are at unprecedented heights. It’s true that with cheaper financing, developers will get better at math too, but buyer-side financing can have a bigger effect on price increases. If it’s easier for buyers to get money, it can drive prices up, but several real estate developers have recently said that there is no justification for a further increase in the level of construction costs.

Analysts interviewed in our Mood Survey a few weeks ago also expect that while a rise in prices is expected to continue to rise significantly more slowly than before, the Rust Zone home tax could lead to a minimal decrease in prices. And the current decision would provide similar financial relief on both the supply and demand sides, so we see a possibility that the supply of new homes will begin to grow again at current price levels.

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