Hungarian government’s new plan on savings may skyrocket property prices

The Hungarian government believes the country’s economy and the state budget are struggling because of the Hungarian people’s low consumption rate. The Orbán cabinet thinks they should somehow facilitate the release of savings, which statistics show to be high. Therefore, the Economic Cabinet is discussing an initiative allowing savings to be spent on home buying tax-free.

Property prices in Hungary may skyrocket again

According to G7.hu, the VAT revenue of the state budget is EUR 1.27 billion lower than calculated during the budget planning. Some experts believe one of the main reasons is the high prices in Hungary and the shopping tourism, as a consequence. We wrote HERE that the number of Hungarians shopping abroad because of the lower prices is rising unstoppably.

Meanwhile, the government believes that one of the main reasons behind the decreasing consumption is the growing savings, which the Hungarians do not want to spend due to the multiple crises between 2020 and 2024.

The Economic Cabinet is now mulling over an initiative allowing people to spend their savings on home buying tax-free. Even though we do not know any details, such a measure would revitalise the sluggish Hungarian property market. The proposal would enable money in pension funds, long-term investment accounts, and life insurance to be spent on property. It might happen that the government would make that possible even for owners of government bonds. Those two coffers contain EUR 28 and 33.08 billion, respectively. Currently, people do not spend their yield.

New bank products needed

Such a large amount of money would stimulate the Hungarian construction industry and the country’s economy. Márton Nagy, Hungary’s national economy minister, said growing real wages in Hungary does not result in more consumption in the retail sector. Instead, people spend more on housing.

Péter Gergely, a BiztosDöntés.hu expert, said banks should create new financial products to cover new needs. For example, they should have new real estate loans adjusted to government bond deadlines and yield payments. He added those savings could lower property interest rates and divert people’s attention to government bonds since they would have a new role in the market.

G7.hu wrote that the most pressing question is how the market will price the new measures and whether or not they would cause a considerable property cost increase.

Read also:

• New apartment prices in Budapest see highest increase among European capitals in 2023 – read more HERE
• Válasz Online: All-time greatest property scam in Hungary involving Orbán cabinet and government-close businessmen unveiled

Featured image: depositphotos.com