New home shortage expected from 2021
Takarék Mortgage Bank, previously known as FHB Mortgage Bank, expects home prices to continue rising this year, but the pace should decelerate. Meanwhile, the government does not plan to extend the preferential 5% VAT rate for new homes.
Speaking at a conference in Budapest on Wednesday, Takarék Mortgage Bank CEO Gyula Nagy said that, in regional comparison, Hungarian home prices are still not high; prices have just been correcting upwards from a very low point.
Last year in Q1-Q3, home prices rose by 10.3%, in 2016 in the same period by 17%, which shows that the rate of price increases is slowing, Nagy said, as cited by national news agency MTI.
Banks are growing more cautious, home loan interest rates have been rising for a few months but the share of home loans in Hungary is still relatively low compared to the region, Nagy added.
Áron Horváth from Eltinga property market research center said that in 2018 home prices could rise on average by 5-10% in Hungary but in the capital this could be higher than 10%.
Also this week, finance minister Mihály Varga said that the government does not plan to extend the preferential 5% VAT for new homes, which will end in December 2019.
OTP Ingatlanpont made a calculation regarding possible effects on the market of the VAT returning to 27%. Now that the intentions of the government are clear, customers will be motivated to pay the price of their homes under construction before December 2019, so that they will not have to pay the 22% higher price. This will increase applications for credit, OTP Ingatlanpont says, as cited by business daily Világgazdaság.
It is also likely that the demand for new homes will dramatically decrease after 2019, as potential buyers will do everything to complete the acquisition before the higher VAT comes into effect. The drop in available new homes will probably be visible starting from 2021, the study says.
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