If the latest proposal of the Hungarian National Bank (MNB) is accepted, young adults in Hungary will be able to buy their first homes much more easily than before. This can bring significant changes in the Hungarian real estate market, including second-hand and new apartments, as well as property rentals.
The latest proposal of the Hungarian National Bank would like to support young people who would like to buy a home with lower self-sufficiency. Under current rules, young people have to pay a minimum of one-fifth, 20% of the property price to buy the ideal property out of a home loan.
However, according to the latest proposal of MNB, this limit would be reduced to 10% that would halve the current limit.
The acceptance of the proposal would be a great financial advantage for young adults who would be able to purchase their first home much more easily than before. In addition, they can also take advantage of the PIT (Personal Income Tax) exemption, the expected increase in wages, the involvement of parents as debtors or the use of state subsidies.
As a result, the new economic regulation can also significantly rearrange the Hungarian real estate market.
Besides stimulating the real estate market of second-hand and new apartments, it might have a remarkable impact on the rental market as well.
Firstly, it can reduce the demand for rental apartments if even more people decide to buy an own property. Secondly, it can increase the demand for studio apartments for sale as they represent the entry-level to the real estate market. According to László Balogh, senior financial expert of ingatlan.com, it would revive the market for first-home studio apartments, i.e. homes of 40m2 and less, which were otherwise among the most popular in recent years in terms of demand.
The price of second-hand apartments of this size varies from district to district. The lowest price category is registered in the 20th district (EUR 1654/m2), followed by the 14th district (EUR 2,198/m2). In the 6th, 7th, 11th and 13th districts, the price per square meter is between EUR 2,285-2,725. The most expensive districts are in the Buda Hills. The average prices per square meter in the 2nd and 12th districts are above EUR 2,734. In the case of new homes, we can find even higher prices per square meter with an average of EUR 2,790.
In large rural cities, the level of prices per square meter is much lower. In Győr, a second-hand home is offered for sale for EUR 1,969/m2, in Debrecen for EUR 1,742/m2, in Szeged for EUR 1,307/m2, in Pécs EUR 1,304/m2 and Miskolc for EUR 987/m2.
As the Hungarian news portal Pénzcentrum reports, based on average supply prices, a 35-40m2 second-hand apartment cost EUR 79,300-90,300.
Based on the proposal of MNB, even a tenth of this amount would be enough to apply for a housing loan, for which the monthly repayment of 20-year housing loans would be EUR 454-522.
This does not mean a final solution in all the cases, as the average net income of Hungarian young adults is EUR 667, most of whom cannot afford this amount of monthly repayment.
According to the financial expert, Hungarian young adults can take advantage of other state-subsidized solutions as well in order to purchase their first home. For couples planning to have children, for example, a baby-waiting loan is a good option, by which the monthly repayment can be reduced significantly. In the case of married couples, the credit burden is spread over several incomes. As well as some young adults can realise the purchase with the help of parents, either with direct support or as debtors for the loan. Accordingly, if the proposal comes into effect, it would halve the time it takes to raise a deductible if a young person set aside their full salary for this.