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News in Brief January 12

CEO György Palkó standing in front of the Ajka power plant on January 9, 2018. Photo: MTI/Boglárka Bodnár

Veolia to Spend HUF 800 mln on Environmental Upgrade at Ajka

French-owned Veolia Magyarország Energia will spend HUF 800 million on developments at its newly acquired power plant in Ajka in order to improve efficiency and eliminate the long-standing problem of soot and so-called fling ash around the plant, CEO György Palkó said yesterday, Hungarian news agency MTI reported. Veolia acquired Bakonyi Erőmű, the operator of the Ajka power plant (149 km southwest of Budapest), in December 2017. The investment is due to start in the first quarter of this year. The plant is fueled mainly with biomass, but also burns coal. Veolia said it wants to reduce the amount of coal used at Ajka. The French company bought and upgraded Central Europe’s biggest biomass-fueled power plant, in Pécs, in 2007. It acquired another biomass-fueled plant in Szakoly in 2016. Bakonyi Erőmű generated revenue of HUF 13 billion in 2016, public records show. The plant has 285 people on payroll, making it one of the biggest employers in Ajka.

Decision on Home Construction VAT Urgent

Home buyers using the Family Housing Allowance (CSOK) can only sign contracts for homes which will get their occupancy permit before the middle of November 2019, vg.hu reported. The reason is that the 5% VAT rate for new home construction projects will only be valid until December 2019. The government said recently that it may consider extending the lower rate in the second half of 2018. Tibor Nagygyörgy, CEO of Biggeorge Property Zrt. said that this will be too late as investors, market actors and buyers will be insecure in terms of planning capacities. That insecurity will be reflected in the costs of the projects which developers will not be able to handle. Such projects will be cancelled and buyers will be disappointed. CSOK buyers will also be excluded from the market. Nagygyörgy added that the real estate business expects a rush of buyers who want to buy before prices increase significantly, but increased demand is likely to push prices up anyway. Tamás Ádány, CEO of OTP Ingatlan Zrt. said that the later the decision is made regarding the VAT rate, the longer and more significant the relapse will be. OTP Ingatlan Zrt. has also postponed buying new parcels of land for construction pending the decision, he said.

Nagykanizsa to Invest HUF 15 bln in Urban Development

The town of Nagykanizsa (214 km southwest of Budapest) has received HUF 15 billion to build a multifunctional sports and event hall as well as a swimming pool within the framework of the Modern Cities program, napi.hu reported. The swimming pool will cost HUF 6.2 bln and will have 50-and 25-meter pools suitable for international events. The work is scheduled to be completed by the end of 2019.

Demand for Commercial Retail Space set to Grow

The commercial real estate market has expanded, prospective tenants are lining up for retail space in the city center and shopping malls are almost full in Budapest, portfolio.hu reported. In the city center, new restaurants, cafés, pubs, and fast-food chains are opening, mostly as a response to increased tourist numbers. Turnover in shopping malls also increased by 14% between 2013 and 2016, and in 2017 it grew by further 6%. In 2016, 11 new retail brands entered the Hungarian market, and in 2017 four more, three of which targeted the center (Palmers, Marina Rinaldi and Pinko). Hungary is fifth on the list ranking countries which are potential targets for international brands, with 19 retail chains indicating it as a target for expansion, according to a survey by CBRE, which brands itself as the global leader in real estate services. While demand is growing, no shopping centers or retail parks were built last year, only a new IKEA store opened in 2017 in Soroksár (District XXIII in Budapest). There are four more projects, including Párisi Udvar, Etele Pláza by Futureal, a 14,000 sqm strip mall Immochan in Solymár, and the 55,000 sqm Aquincum Center by ECE in the north of Buda. Rental fees are expected to grow in the future.

NAV has 5% More Tax Revenue in 2017

The National Tax and Customs Administration (NAV) announced that tax revenues in 2017 were 5% (HUF 609 billion) more than in 2016, index.hu reported. The rate of increase is higher than the expected rate of GDP growth, the Ministry for National Economy said. The total tax revenue was HUF 13.402 trillion in 2017. The reason for the growth is that tax rates have decreased and it is no longer worth avoiding paying taxes, said András Tállai, the head of NAV. Hungary has the lowest corporate tax in the European Union and the second lowest personal income tax, he added. NAV has a new policy of cooperating with clients as opposed to imposing fines or issuing debit order collection orders, which means that after giving notice taxpayers who had failed to pay their taxes can settle them without being charged a penalty or any additional costs.

Qatar Airways to Introduce Wide-body Airbus on Budapest-Doha Route

Qatar Airways is expanding its service from Budapest to Doha, welcoming a new Airbus A330 wide-body aircraft from this summer. The route is currently operated twice-daily by the narrower-bodied A320. The increase in demand for travel to and from the country and what the airline calls its “steadfast commitment to the Hungarian market” will result in the new 272 seat aircraft being used on one of the daily flights between Budapest and Doha. Qatar Airways’ seat capacity to Doha on this flight will nearly double from the 144 seats available on the A320. Qatar Airways country manager for Central and Eastern Europe, Grisha Jenkov, commented: “We are delighted to introduce Qatar Airways’ Airbus A330 to Budapest, which will not only offer an increase in capacity to the route, but will also redefine the in-flight experience of our passengers travelling to Doha and beyond.”