News Article Hungary mortgage Poland residential
by Property Forum | Interview

Governments in Hungary and Poland have introduced new and renewed schemes to push the local housing market. The mortgage market has already shown some positive signs in both countries. However, the residential markets still face several problems which can not be solved quickly, says Guy Dymschiz, co-CEO of Duna House Group, active in Hungary and Poland.

Exactly a year ago you said in the interview with Property Forum that the residential market in CEE needed a push from the state to recover. Since then have you seen such moves from the governments in the region?

We saw the end of all types of housing subsidies in the Hungarian residential property market at the end of last year, and as the government was facing a substantial budget deficit, it was assumed that no significant new subsidies would be forthcoming to replace the previous subsidy scheme. The new CSOK Plusz, starting this year, is a hybrid support scheme that looks promising and we expect it to have a positive impact on the market. Thanks to the revised and updated state housing support (CSOK Plusz, Falusi CSOK, Babaváró subsidy), not only young people buying their first home will get considerable support, but also those moving into a larger property to expand their family. These gradually announced changes will have an impact on the market in 2024.

In Poland, the 2% Safe Mortgage Program was, in my opinion, an overkill, precisely timed to coincide with the Polish parliamentary elections. It had a strong impact on the market, boosting transaction numbers and loan volumes on the positive side. However, it also forced prices up, making it even more difficult for Poles to buy a home. In more detail, the 2% Safe Mortgage Program was launched in Poland in mid-2023 and has become a driving force for the entire housing market. The underlying idea of the scheme was to provide subsidies on loans for first-time buyers over 10 years. As expected, the program attracted great interest from borrowers, who signed 55,000 loan contracts within six months, exhausting the resources earmarked to finance the project. However, the scheme also had side effects. It was one of the reasons for the rapid rise in house prices. In the largest cities, the increase has exceeded 20% per annum. The current government believes that the market will continue to need some form of government support, and is currently working on another scheme, the details of which may change, so it should be evaluated only after its final form has been adopted.

There has been a recent political change in Poland which might bring important modifications to the local budget. Do you think the property market will get that much-needed push as well?

During the campaign, the winning parties pledged to carry on with support schemes for borrowers by proposing the introduction of a 0% interest-free loan project. Discussions on the design of the scheme started in Poland earlier this year. The scheme has attracted some serious criticism, as it raises concerns about possible further increases in house prices. These concerns may be justified, given the potential of further price increases in a limited supply environment. Indeed, the debate has also seen a growing number of people raising the need to support the construction of rental housing. Experts argue that the implementation of loan subsidies should be integrated into the housing policy itself, as the ad hoc measures we are seeing now are not beneficial for the development of the market in the long term.

Guy Dymschiz

Guy Dymschiz

Co-Founder and Co-CEO
Duna House Group

Guy Dymschiz is the Co-Founder and Co-CEO of the Duna House company group operating since 1998. He studied law at Tel-Aviv University and obtained an LL.B. degree. He later specialized in corporate law, mergers, buy-outs, syndicates and investment agreements in the capital markets. He founded the Duna House company group together with Doron Dymschiz in 1998. He was born in Germany and lives in Budapest with his wife and his two children. More »

What could be the major impact of the latest changes made by the government in Hungary?

Recent economic difficulties, rising inflation high lending rates, and the increased cost of living in general have significantly dampened demand in the 2023 housing market. However, changes around state housing subsidies in the second half of 2023 imposed a choice on families who will no longer be eligible for the revamped subsidies this year. They could either take advantage of the old support schemes and buy a home in 2023, or they could wait and purchase a property in a changing housing market amid increasing demand and therefore rising prices, with no subsidy at all. More people decided in favour of the former option, which made a mark on the year-end transaction figures.

The second half of 2023 saw a new momentum in the domestic housing market, which will continue in 2024 because although the 2024 scheme will favour a narrower group of buyers, those who do benefit will receive significantly more support from this year onwards. People planning to start or expand a family, buy a first home or move into a larger property will play a major role in this year’s property market. In addition to customers buying a home, investors may also return to the property market this year. This will be the second major change that will have a very strong impact on the market in 2024. It stems from the government significantly suppressing the interest rates available in the financial markets, whether on government bonds or bank deposits. While you could earn 15-20% on Hungarian government bonds, real estate in Hungary was not an attractive investment. However, the new yield environment could change the situation in 2024.

Part of the moves in Hungary concentrates on the small villages to prevent the outflow of residents and attract newcomers. Consequently, the demand will grow resulting in a substantial price rise as it happened in the suburbs of Budapest. Is that a real threat?

Some municipalities may indeed experience a higher price increase, similar to that seen in the conurbation of the capital, but recent government intentions were characterised by an attempt to eliminate the effects causing direct price increases. Nevertheless, inevitably, prices in the small villages favoured by the Falusi CSOK scheme will also rise as a result of the expected increase in demand and higher subsidies. In these settlements, the biggest challenge will be posed by supply, i.e. whether interested parties will be able to find properties of sufficient quantity and quality in their chosen settlement. Another interesting question is whether these subsidies will be able to reverse the urbanisation trend, or they will only result in a temporary revival of the rural lifestyle; and, after a certain period the main trend will return and the emptying of villages will continue.

What is your expectation on the amount of loans taken out last year in Hungary? Do you anticipate clients will use that money to buy new homes or refurbish their existing ones?

The declining interest rate trajectory, the voluntary interest rate cap and the renewal of subsidy schemes are all boosting citizens’ confidence, which is one of the most important factors when taking out loans. This is why we expect a much livelier loan market, with a volume of HUF 750-850 billion, i.e. a 30-40% increase compared to last year. The focus of the subsidy schemes is primarily on purchases, as CSOK Plusz, unlike Falusi CSOK, cannot be used to finance the renovation of existing properties. We continue to look forward to government incentive schemes supporting the renovation of urban properties.

Despite some encouraging moves from governments buying an apartment remains a dream for millions in the region. Rental prices have risen, and we do not see downward trends there. What are the major challenges facing rental markets across Central Europe this year?

In Hungary, we still do not expect prices to fall, as demand has not decreased, while supply is still tight. Tenants in the outskirts of the capital are likely to be able to cope with rent increases that match the January wage rises, but prices in the central districts are increasingly being adjusted to the wallets of foreign tenants. It may be a challenge this year for prospective tenants entering the market in the summer rush to find properties in the right quantity and quality in a category they can afford.

The problem of sudden price rises is the number one topic in Poland, and also a great challenge for the new government. Broad structural solutions are needed that take into account the needs of each layer of society. Supporting purchases on the commercial market is one of the tools of housing policy. We probably need measures that support council housing, and cooperative and municipal development projects, too. A major challenge for the Polish real estate market is the amendment of the law on the protection of tenants’ rights. The imbalance between tenant and property owner rights means that, despite a high proportion of investment purchases, a significant number of properties are not being put on the rental market for fear of the possible consequences of renting them out to an unreliable payer.

Do you agree that built-for-rent activity should increase across the region? Is this a long-term option for developers in many countries in CEE?

This is a question of economic/housing policy, as both concepts have their advantages and disadvantages. In Hungary, the population explicitly prefers to live in their own homes, and the government is also putting this first (as shown by housing subsidies). Therefore, I do not think that there will be any change in this area in Hungary in the medium term. Poland was rather open to this. The private rental sector in Poland comprises 15,000 residential properties available for rent. Another 20,000 apartments are in the preparation phase. The high cost of project financing is a barrier to the expansion of the sector in cases where the developers lack sufficient equity. The private rental sector in Poland faces a high number of difficulties related to legal and fiscal uncertainties and the need to implement sustainable construction methods. Funds are also competing with credit support schemes to encourage home purchases.

Apart from the activities of the PRS sector, developers in Poland are not interested in the system in which they build and then rent the apartments they build. This is the result of the traditional model of societal functioning in which people tend to buy their own homes rather than renting them on a long-term basis. This attachment to home ownership is felt in all countries in the region but may change significantly in the coming period due to generational differences. Young people nowadays no longer insist on having a privately owned home, so they may be attracted by the option of renting, which also offers them the flexibility they need.

How about private investors in the residential market? Do you expect another influx of foreign buyers in the short term?

While 2022 was the year of investors, 2023 saw a decline in private investor activity, too, but they still had a share of 36% on average in last year’s transactions. In 2024, a change in the economic situation and the fact that government bond yields have almost halved to below 10% could increase the prevalence of real estate investments. If more people choose to invest in real estate again, it will further increase transaction numbers in the downtown areas of the capital and university towns. Increased investor interest could also have a positive impact on the property stock, as this group is keen to buy properties in need of modernisation or refurbishment and can be exploited easily by renting them out once the work is completed. The proportion of foreign buyers has also increased recently in the capital and larger cities and industrial centres in the country.