New home completions slightly exceeded 6,000 in the first half of 2024, marking an 18% contraction y/y, the lowest figure since the 2008 economic crisis, financial website Portfolio.hu reported. The government’s recently announced economic action plan includes several measures aimed at stimulating the housing market and addressing the acute housing crisis.

In Budapest, the number of newly built homes fell by 8.3% to 2,124. Similarly, county-level cities saw a 20% decline, smaller towns experienced a 27% drop, and in rural areas, the figure decreased by 19%.

Following a significant peak in 2020, Hungary has seen a continuous decline in newly constructed homes. Since data collection began in the 1960s, the only period with lower figures than the current one was during the seven years following the 2008 financial crisis. To put this into perspective, at the current pace of new constructions, it would take at least 250 years for Hungary’s housing stock to renew, compared to the 40-50 years seen as the benchmark.

New housing constructions are highly concentrated in just a few districts of the capital. The 11th district in southern Buda, including the popular Kopaszi-gat peninsula along the Danube—home to MOL’s new HQ and other commercial property investments—accounted for 46% of all developments in Budapest in the first half of the year.

Similar trends prevail outside the capital, with northwestern Hungary, the areas around Budapest, and the Balaton region standing out. Housing construction activity has also been strong in industrial hubs such as Gyor (Audi), Kecskemet (Daimler), and Debrecen, where BMW’s new €1 billion factory is set to start operations in 2025.

Around 40% of homes were built by individuals in the first half of the year, unchanged from the base period, and the average size increased by 1.6 sqm to 95 sqm.

Analysts consulted by Portfolio.hu expect new home completions to drop to 16,000 this year, down from 18,650 in 2023 and 20,540 in 2022. The market is expected to recover to 2023 levels by 2025.

The government has recently unveiled an economic action plan to restart growth and potentially provide room for fiscal stimulus ahead of the 2026 election. Several measures target the housing crisis.

The preferential 5% VAT rate on home purchases could be extended until the end of 2026, and a voluntary 5% cap on mortgage rates may be introduced in collaboration with the banking sector, specifically targeting first-time home buyers.

Additionally, the government plans to tighten regulations on short-term rentals, with taxes expected to increase four- to fivefold. The scheme also includes the construction of more dormitory rooms in the capital, a housing programme for young Hungarians, and the launch of a home renovation scheme for smaller settlements.

To stimulate demand, up to half of SZEP recreational voucher card spending could be used for home renovation, and voluntary pension fund members may be allowed to tap their savings tax-free for home purchases and renovations.

The investment fund association BAMOSZ warned that this measure could boost VAT revenue in the short term, but might have negative long-term impacts. There are around HUF2.1 trillion (€5.25bn) in voluntary pension funds, though many of the 1.1mn members have near-zero savings.

Analysts estimate that around HUF1 trillion could be rechanneled into the housing market. However, without sufficient growth in supply, this could lead to double-digit home price increases in 2025 or a 6-7% rise in real terms, they warned.