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- zero loan for green homes
- this may require a loan of 15 million HUF
- a net income of 400 thousand HUF per month is required
- a fraction of the population is so rich
According to the central bank governor, the government’s housing policy did not yield the expected results because, although the objective is to be supported, it actually only generated inflation and not housing. The objective would be to build 30 to 40 thousand floors a year, more precisely a green house, which would cause a demographic change and boost GDP. This would also require an unspecified “radical housing policy change” at the government level, writes the former finance minister.
Parameters
Suppose you have this turn, whatever that means. In other words, it is possible to build 30 to 40 thousand floors per year: last year 21 thousand floors were built, before those 17 thousand and in 2016 not even tens of thousands. Suppose further that the loan scheme outlined by Matolcsy can also be developed. This means that half of the households use their own resources, family support, chocolates and other loans for construction and purchase, and half of the zero percent non-mortgage green home loan coordinated by the central bank, whatever it is. designed. The green house will henceforth be a passive house.
The average area of residential buildings in Hungary is 97 square meters; in Budapest only 68, but in Komárom-Esztergom county the average is 140. Therefore, consider a passive house with an area of 100 square meters. For the sake of simplicity, we already have the plot, we do not spend on it and we will build the house for 30 million florins. Construction can cost much more than that, we set the price at HUF 30 million based on the cheapest offers on the market and also calculated some VAT reductions, if the central bank governor had already urged a government decision on the topic. In any case, the cost of HUF 30 million is the result of a fairly conservative estimate.
Zero interest means millions
Half of this is created by someone, sells the old house, the vacation home and borrows, if very little. The other half is financed by the Matolcsy loan. The APR of the cheapest mortgage loans on the market is around 3-3.3 percent, depending on the construction. This means that, with a ten-year maturity, you will have to repay approximately HUF 2-2.5 million more over ten years than the Matolcsy loan. If the term of the home loan is not ten, but 15 years, the interest charge is already 3.5 million HUF and, in the case of twenty years, it exceeds 5 million HUF. So the Matolcsy loan can mean a lot.
The question is: to whom. The answer: for a few. Much of the population is out of the background.
The ten-year term means that the monthly repayment of the HUF 15 million loan is HUF 125,000. In the case of market mortgage loans, you cannot float below HUF 145,000. Under regulation to protect against over-indebtedness, the monthly fee cannot be more than 35 to 40 percent of net pay. This should include all loans, which means that if you already have a personal loan or credit card, it will also reduce the maximum repayment on your future home loan. Now we take as a basis that there is no other type of loan or credit debt, that is, the possible green creditor can go to the wall.
That is the amount of net income you need
In addition to the loan of HUF 125,000, a net salary of HUF 350,000 is required. This is the minimum on paper, but when applying for a loan, it is good that the client is established in the bank with the highest income. So we have a monthly net income of 400,000 HUF, in addition to which it can be stated with great certainty that the applicant will receive the loan.
Who has this income in Hungary? According to the tax authorities, quite a few people. According to the data obtained from the IRPF declaration of 4.77 million, in 2018 (this is the last detailed data, but the order of magnitude has not changed), the average salary income barely exceeded three million florins. This means an average salary of HUF 250,000 per month. Its net of discounts is 166,000 HUF.
But according to the CSO, the gross salary is 367 thousand!
The average salary set by the CSO and the NAV differs significantly. NAV’s annual revenue of HUF 3 million, that is, a monthly average of HUF 250,000, is in line with the OSC’s HUF 367,000 valid for 2019. What is the real one?
Of course both. Only the two calculations are based on a different methodology. The CSO calculates the salaries of employees in companies with at least five employees and at least eight hours of employment. This means that an employee who works for a company of one or two is not included in this statement. And there is no one in it who only works part time.
NAV, on the other hand, provides data on the amount of income reported by an employee who filed a PIT in a given year. This includes those who worked only a few days, those who worked four to six hours a day, and those who worked eight hours continuously.
So the CSO shows that among those who work continuously for eight hours, this counts as average salary. NAV, on the other hand, indicates the amount of the person who earned PIT income. The actual income ratio is somewhere in between the two, since, for example, income withdrawn from a business is not included in either statement, just as income from cats is not.
Almost 32 percent of PIT taxpayers reported monthly income of less than HUF 166,000 on average. And 47 percent of the population had an annual gross monthly income of less than HUF 334,000, of which HUF 222,000 was net without tax relief. Therefore, this round is simply out of the question when judging a loan with a monthly payment of HUF 125,000. Even those who earn six million guilders a year, as the net gross monthly salary of HUF 500,000 is only HUF 332,000.
The Matolcsy loan requires a net salary of HUF 400,000, that is, a gross salary of HUF 600,000, which is more than HUF 7 million per year.
In this income band, NAV no longer divides tax returns into one million, but two million guilders, so all that is known is that 6 percent of people’s income tax returns physicists report annual salaries between 6 and 8 million florins. Above this, above 10-20 and 20 million guilders, 15 percent of employees.
If we are very permissive, then it can be said that 15-20 per cent of the employees will surely receive the criticism and could get the Matolcsy loan worth 15 million HUF over ten years. However, this would hardly solve the housing problem in Hungary.
Who can ask for a mortgage loan?
Of course, many more people can get a home loan. On the one hand, the average amount of home loans is less than HUF 10 million, and on the other, the term can be significantly extended. Therefore, if a term of twenty years is chosen instead of ten, the repayment of a loan of HUF 15 million can be reduced to HUF 80,000. A net income of around HUF 200,000 is sufficient for this, but only if the household has no other loans.
Banks not only accept wages as income, but also include transfers in judgment, i.e. family allowance, gyes, gyed as secondary income. Also, up to two people can apply for the loan, so the income adds up. Of course, this will not put single-person households in a better position.
However, the idea outlined by the central bank governor in its current form would certainly not live up to expectations. If the goal is to significantly increase the number of home constructions, a multiple of the current capacity, then the related credit should be designed in such a way that it can be achieved as widely as possible. However, a loan that requires a net income of 400,000 HUF does not meet this requirement.
(Top Image: György Matolcsy, Governor of Magyar Nemzeti Bank (MNB), speaks at a conference on the MNB’s growth loan program at the Marriott Hotel in Budapest on November 20, 2013. MTI Photo: Zoltán Máthé)
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