News & Analysis

Hungary urged to adopt new housing policies

Hungary’s housing policies are failing, the governor of the national bank (MNB) György Matolcsy has claimed, urging the government to draft new policies to redress what he views as a weakness of the Hungarian economy.

According to an opinion piece published on the Hungarian portal, in recent decades the only good housing policies have been those of the first Viktor Orbán government, which took office in 1998. Mr Matolcsy cited the 44,000 new homes built in 2000 as a positive example. Current schemes however aren’t able to reach the same numbers both in terms of quantity and quality. Furthermore, foreign currency loans introduced in 2002 brought dramatic consequences for homebuyers.

“The governmentʼs [current] housing policy, launched in 2014, was founded on successful management of the crisis, a fiscal turnaround, and the phasing out of Swiss franc-denominated retail loans, but was bleeding from the start,” Mr Matolcsy writes. “No state organ was responsible, the policy lacked a tried and tested strategy, and it applied lopsided tools that boosted demand but not supply, thus creating inflation. There was no coordination with regional policy, transport developments, construction and building materials industry investments, and vocational training; the policy was not environmentally friendly, it favoured owners over renters, and it ignored international policy examples.”

Therefore, current policies are only stimulating demand, leading to an acceleration of real estate inflation. In fact, since 2014 prices have risen by 104 per cent in the whole country and by 184 per cent in Budapest.

“Today we need 15 years to buy a 90 square-metre home with an average income,” he continues.

According to the MNB, in 2019 Hungarian house prices have continued to rise, exceeding the percentage recorded at the end of 2018. This rising demand continues to be supported by high employment, increase in incomes, a high level of savings and a low interest rate environment.

In particular, the situation in Budapest is getting worse as Hungary’s capital is the sixth most expensive among European capitals in terms of both property prices and rents. In Budapest, the home ownership rate is 80 per cent compared to Vienna’s 22 per cent, a number that can hinder Budapest’s competitiveness.

Mr Matolcsy urged the government to see housing policy as a national priority and called for the establishment of an ad hoc organisation focused on the creation of “a vision, a strategy and a sustainable home market.”

This demand is also supported by Habitat for Humanity Hungary, a non-profit housing organisation working to empower people to overcome the chronic lack of decent housing.

Habitat for Humanity, an NGO, is also urging the establishment of a central body, but says that it is important to extensively consult with expert organisations in order to develop a long-term and well-functioning strategy that not only will reflect economic necessities but also will approach the solution from a social perspective.

“The current housing policy – or rather the lack of a uniform and sustainable housing policy – not only contradicts economic rationality and diminishes the country’s competitiveness, but also constantly worsens social disparities and does not sufficiently support housing for the poorest,” said a spokesperson for the NGO.

According to its 2019 annual housing report, the housing crisis is already severely affecting the middle class, including the young. Almost two-thirds (62.7 per cent) of those aged between 18 and 34 years old are still living with their parents. As such, the NGO recommends the creation of an affordable rental housing scheme, with the support of the Budapest municipality.

In December, Budapest’s mayor Gergely Karácsony signed the Pact of Free Cities, together with the other three liberal mayors who lead the capital cities of the Visegrád (V4) Group (Warsaw in Poland, Bratislava in Slovakia and Prague in the Czech Republic). The pact includes the development of measures that will address the housing situation in each country.