It has never been so hard to save money to buy our own home in Hungary. Without significant financial support from the family, it is now almost impossible to buy a house or a flat. In the past three years, Hungary has seen the biggest price increases in the EU. There has been a sharp increase in construction, rents and house prices. Budapest ranks in the top third of the EU in terms of house prices relative to income, Telex reports. The question their new Telexicon aims to answer is this: why is it so expensive to have a roof over our heads?
Because there is so much money in the housing market, people’s housing needs are not the only thing that is taken into account: making a profit is just as important for those for whom it is an investment. There are periods when there is more financial investment in the sector and the logic of the money market is becoming increasingly dominant in the housing market. This is called financialisation.
The abundance of money makes getting a home both easier and harder, Telex says. On the one hand, money flows into the housing market through bank loans, and banks make it easier for customers to borrow and get into debt. On the other hand, the abundance of money and demand drives up prices, making housing more expensive. If this bubble bursts, many people could even losing the housing they have acquired with their loans. The majority of people are defenceless against rising prices, but making housing unaffordable would cause a social crisis. That is why no country would allow the market logic in housing to be completely unleashed.
The extent and modalities of public involvement vary from country to country. In Hungary, it sounds good when the state helps families to get a home through various programmes (CSOK, Baby waiting loan). But these programmes have several drawbacks: on the one hand, they do not help the most needy, only the middle class. On the other hand, the state provides most of its support at a time when the housing market and the economy are booming anyway. And this kind of intervention only adds to the ups and downs of the housing market.
And finally, as both sellers and builders expect buyers to have more money, they raise their prices. Thus, the bulk of the government aid (or public money) ends up going to contractors, property owners and lending banks. The model also performs poorly in quantitative terms, with too few homes being built. This is not good neither for buyers nor for the construction industry. The construction industry could be producing many more homes today, but instead, it has been tied up in large-scale projects commissioned by the state over the last decade.
In the crisis, several building blocks of the system are now coming out at the same time: soaring construction costs are eating away at contractors’ profits, interest rate rises are making borrowing less attractive, and subsidised loans are becoming a burden on the public purse. The established model of housing support is therefore fragile and not very successful. But what could be an alternative?
According to housing policy experts, the solution is supply-side intervention, which focuses on providing secure housing for all, rather than financial support for home ownership. An important element of a people-centred housing policy would be to offer a solution for all sections of society, not just those who already have the initial capital to buy a home.
In an optimal case, public intervention will create a so-called housing ladder, with a jumpable distance between levels (1 – social rented housing, 2 – rent, 3 – small flat, 4 – garden house), so that even those who start at the bottom can move up over time. Supply-side intervention may include public construction or the creation of institutions such as municipal and non-governmental housing agencies and housing associations.
It is likely that an economic crisis will break the current momentum, with far fewer deals being struck in the property market and it will be harder to sell a home. This could leave buyers with more room to bargain. But there is little prospect of a price fall like we saw in the early 2010s in Hungary.
Source: Telex.hu (YouTube)