New residential developments are rapidly expanding in Hungary, helping to boost property prices in the former Eastern Bloc nation.
The number of home building permits issued in Hungary in Quarter 1 to Quarter 3 rose by 32.7 per cent year-on-year to 28,411, according to data released by the Central Statistics Office (KSH).
The number of residential building permits issued in Budapest rose even more dramatically by 103.5 per cent to 10,952. In county seats and cities with more than 50,000 residents, the number was down slightly by 4.6 per cent at 6,075.
Residential property sales overall fell slightly in October, down 1,393 from the September total to 12,246. However, this still marks a significant increase of 13.5 per cent year-on-year.
A quarterly gauge by the National Bank of Hungary shows that residential prices as a whole in Hungary rose an annualised 15.3 per cent in the second quarter, lifted by higher prices in smaller settlements.
Residential property prices rose by 14.6 per cent year-on-year in the capital of Budapest during the period, whilst at the same time residential prices in smaller settlements soared by 25.9 per cent, helping to boost the national average.
The rise in new residential developments was helped by a temporary lowering of the VAT rate on home construction by the Hungarian government from 27 per cent to 5 per cent in late 2015. At the same time they also eased rules for obtaining building permits for residential construction.
Of the new builds constructed the share between property developers and private individuals remained at around 50 per cent each, unchanged from the previous year.
The temporary preferential VAT rate for new residential construction is currently set to expire at the end of 2019 unless the government chooses to extend it or make it permanent.
Overseas property investors considering building their own residential property in Hungary may have around two years left in which to benefit from the lowered VAT rate.