Niilakunk.hu conducted an interview with one of the key experts in housing subsidies. According to this, the review, evaluation and possibly correction of home creation measures is necessary from time to time in order for an appropriate support system to operate in Hungary in the long run. Ádám Banai, the Managing Director of the Magyar Nemzeti Bank responsible for monetary policy and foreign exchange reserve management, was asked about his assessment of the operation of home improvement subsidies so far and what adjustments might be needed in the future.
Ádám Banai (below our picture): The measures to create a home in recent years have provided families with nearly HUF 1,400 billion for housing. In addition, according to a questionnaire survey of the MNB, 75 per cent of the loans waiting for babies (approximately HUF 1,140 billion by September 2021) were for housing purposes, while 44 per cent (approximately HUF 670 billion by September 2021) were spent specifically on housing.
The most frequently used benefit is CSOK, through which families raising about 200,000 children received support in connection with the achievement of their housing goals. Among the programs launched in 2021, home renovation support is also very popular, by October 2021, about 57,000 support applications had been received. That is, if we look at the volumes and the number of families reached, home-building and family subsidies are successful.
Niilakunk.hu: On the basis of which indicator can the effectiveness of subsidies be assessed the most? Based on this, can the current grants be considered successful?
Ádám Banai: Supporting home creation affects many areas, so its effects are complex. The number of families reached or the number of children reached is an important indicator. The number of two hundred thousand is definitely a success, and two-thirds of the children who buy an apartment have also used CSOK. In addition, it can be seen that the support has helped to stimulate the housing market, as the number of new housing developments has been steadily increasing since the start of the program. In addition to the renewal of the housing stock, this also has a favorable side effect on the real economy.
An important demographic goal of home-building and family support is to encourage childbearing, the impact of which can, of course, only be well assessed in the very long term. In any case, it is encouraging that more than 100,000 children have already been born in CSOK.
The programs also have the result that, due to their widespread awareness, credit market products, together with subsidies, reach more households, thus improving credit penetration in Hungary, and overall confidence in the financial intermediation system can be strengthened.
Niilakunk.hu: Which subsidy proved to be the most effective?
Ádám Banai: It is difficult to judge exactly which program has had the greatest impact so far, overall they can be evaluated together as a package. For example, in the case of tax and new dwellings, the VAT exemption can only be interpreted in conjunction with the application for the CSOK. It is also important to see that the impact of the programs can be felt in many different areas. As a result of the CSOK, for example, the distribution of newly built flats by floor area in Budapest has changed significantly, housing developers have responded to the arrival of the CSOK, and the supply has shifted to flats over 60 square meters due to the characteristics of the program.
Looking to the future, it is important that the individual programs complement each other so that supply and demand in the housing market are balanced.
Niilakunk.hu: Did the subsidies for creating a home reach the demographic, economic, etc. impact they targeted?
Ádám Banai: As a result of the measures to create a home, but especially within the framework of the introduction of the discounted housing tax in 2016, the number of housing constructions increased significantly, reaching 28,000 new flats handed over by 2020. This has a significant positive effect on economic growth, as we calculate that the construction of 10,000 additional new dwellings will increase GDP by about 0.8-1.0 percent and employment by 25-30 thousand people. This is a positive result, we have moved significantly from the low point in the field of housing construction, but in the long run it would be necessary to build 30-35 thousand new homes annually in order to maintain the quality of the housing stock. Based on these, even additional supply incentives may be needed.
Ensuring social reproduction would require 110,000 newborns a year in Hungary, ie the more than 100,000 children undertaken in connection with CSOK is a significant step. However, creating a home is only one part of the family support system. The Hungarian family support system is one of the most extensive and generous in the world, as evidenced by the fact that Hungary spends the second largest amount of family support among OECD countries.
Refinement: Can support programs have negative side effects?
Ádám Banai: Here, too, it is true that the programs are worth examining together. We can see that the vast majority of measures are stimulating demand in the housing market, while there is less supply stimulus. The combined effect of these may be an imbalance in the housing market, as the stimulation of demand, in the absence of an appropriate pace and extent of supply adjustment, will cause an increase in the market, which we can still experience today. In the MNB, the so-called With our Housing Affordability Index (HAI), we measure the extent to which it is possible to obtain housing with the help of a loan. It appears that the availability of families with more children and moving to a new home, such as the expansion of CSOK or the Baby Waiting Loan, has improved significantly with the launch of the program. That is, without the subsidies, it would have been more difficult or impossible for them to buy an apartment. At the same time, partly due to a lack of adequate supply, over time, these subsidies have “become more expensive” as housing prices have risen steadily. According to our estimates, between 2018 and 2021, home creation subsidies resulted in 9 percent higher house prices in Budapest and 10 percent higher in the countryside.
Niilakunk.hu: Why was it necessary for the MNB to create support elements independently (green loan, discount for first-time home buyers)?
Ádám Banai: The MNB was the first in Europe to receive an environmental sustainability mandate, so supporting the government’s policy on environmental sustainability is one of the central bank’s goals. According to an EBRD study, residential real estate is responsible for a third of final energy consumption in Hungary. According to the CSO’s 2015 housing survey, 85 per cent of the stock was built before 1990 (older than 30 years) and 29 per cent before 1960 (older than 60 years). The energy efficiency of buildings is well reflected in the fact that only 23.8 percent of the energy certificates issued since 2016 have a CC rating, ie modern or better. The modernization of the housing stock is therefore essential. For domestic housing loans, banks do not take green considerations into account when pricing housing loans. However, in addition to the social aspects, it is important that the demand for these flats is also very high, ie the preferential loan could be justified from the risk side as well. The MNB responded to these shortcomings by launching the FGS Green Home Program within the framework of its new mandate, making environmental sustainability a new aspect in the housing loan market.
Niilakunk.hu: To hear opinions that the current subsidies help the needy less, the more affluent ones, including e.g. investors. What do you think should be supported by home improvement programs? Should these programs provide social assistance to the so-called to alleviate the housing crisis or primarily for other purposes? In what areas does this program package advance families and Hungary?
You can find the answer and the rest of the interview here:
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Source: Ingatlanhírek by ingatlanhirek.hu.
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