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There are many questions about the New Homes Program launched by Matolcsy, such as how much of the new home market would be affected by the measure: that is, how much would the “green homes” criterion deviate from more stringent energy efficiency standards and already mandatory from 2021? But it is also not clear that if the “free loan” were available to real estate developers in addition to families who build and buy houses for themselves, with roofs, then if the developer already builds the apartment with a free loan, the buyer would also can assume it. then a 0 percent loan, doubling the discounts?
Conscious of current knowledge, we hold on to the past and show what CSOK and the discounted housing tax did on the market 3-4 years ago. Although neither the environment nor the scheme are the same as the subsidies introduced earlier, some of their effects may be similar in the market. Matolcsy’s idea essentially corresponds to a green loan that can only be used for real estate, which can be compared to a loan waiting for a baby for its interest-free interest, but also to CSOK in terms of the real estate market, considering that can only be used for new residential properties.
On November 19, again PIF, where the national real estate industry will discuss the most pressing issues and report on expectations.
What happened after CSOK?
CSOK on January 1, 2016 (actually introduced as early as 2015, but the substantial grant of 10 + 10 million only appeared later) clearly provided a specific social group (prospective or already with three children) with free money and a soft loan, while the current program would help anyone building or buying a new home. So at first it appears to be a much broader subsidy, which is mostly limited by the definition of a “green house” and the income situation, that is, the amount of financing that someone can get for a period of time. 10 years.
The CSO compares the transformation of new homes with 2015, after which prices increased by 64% in the first quarter of 2020, that is
At the end of 2015, an average of 25 million new flats with similar parameters were sold for 41 million HUF in the first quarter of 2020.
Only in Budapest, since mid-2016, there has been almost the same price increase according to data from the Budapest Housing Market Report as in the national new housing market. Presumably, this would be even a bit higher if the 2015 data were also available in the capital and we would take it as a basis.
In Budapest, an average new house was 42 million HUF, while in the summer of 2020 it had risen to 68.4 million HUF, that is, an increase of 63% in 4 years.
The increase of more than 60% is mainly due to the rebound in demand for CSOK and the reduction of 5% in VAT, as well as the increase in construction costs, the important recovery in investor demand (due to short-term spending and long-term, and diversification of higher income and also because many investors bought a new construction house playing with the price increase) and due to the bleak real estate market of 2016. With low construction prices and house prices , it is not difficult to grow that much. But what will happen now that we exceed a growth of more than 60 percent?
Why don’t we expect such a price increase after all?
CSOK and various market incentives have increased new home prices by an order of magnitude of 50 to 70 percent over a four-year horizon, depending on location and quality. This shows, on the one hand, that millions of free payments due to both the VAT reduction and the CSOK have been incorporated into the prices and due to the increasing demand, those who did not apply for the subsidy immediately and did not buy a new apartment immediately , this subsidy essentially disappeared in a year and a half (2017 by the end of the year, the average reached 52 million HUF in Budapest), after which the purchase of a new house became even more expensive.
Still, we do not expect 15-20 percent annual growth, mainly due to construction prices and wages. This was the other factor that made construction more expensive and that developers incorporated into prices regardless of the upturn in demand.
For example, according to official announcements across the country, labor costs rose 15 percent between the end of 2016 and the end of 2017, essentially covering the 15 percent increase in the new home market in one year. It is clear, then, that construction costs increased by 5 percent first and then 10 percent each year. This growth has also been contributed by the fact that the State has also made and is making significant investments (pro-cyclically), which is immobilizing serious skills and drastically increasing the cost of working life, which has a serious deficit. Furthermore, these prices could easily have risen from a low base, but in the current situation such a jump is unlikely to occur, predicting a more robust rise in prices in the new housing market as well. However, the capacities contracted by the state are likely to be maintained, despite the announced plans (Galvanian Bridge, Southern City Gate, Metro 5, etc.), but more importantly, how much labor will be hired in the sector of building construction.
So far we’ve only been talking about the new housing market, but it’s clear that such housing market intervention won’t leave second-hand home prices intact either, especially if such strong credit makes the difference between the two markets. . The bigger question is how big a foundation would be affected by a free green loan, and thus how much demand is escaping from those looking for good quality homes. Greater movement, both on the buyer’s and developer’s side, can lead to bigger price changes for second-hand cars as well.
However, the final reasoning and analysis of the often seemingly contradictory market effects will require more detailed elaboration of the program, which can only take place according to Matolcsy’s input:
if a government decision is made on a radical change in housing policy. In the absence of this, central banks are not worth acting, because while change is necessary, it is not enough to strengthen the source side.
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