Voluntary pension funds to become available for housing in Hungary

New scheme announced

On 30 September 2024, Zsolt Kovács, Ministerial Commissioner at the Ministry of the National Economy of Hungary talked about plans for 2025 at the Conference of Pension and Health Care Funds. He introduced a new proposal that, if accepted, will let account holders spend their savings in voluntary pension funds on housing purposes.

Normally, if you want to retrieve your savings before the contracted time, you must pay a tax. Thanks to the new proposal, if you are spending the funds on residential real estate, you will not be required to pay this tax. There will be no upper limit on the funds you can use this way.

How can you use the funds?

It is not yet clear for what exact purposes the savings taken from voluntary pension funds will be available. Bankmonitor claimed that purchase, renovation, and for the repayment of an existing loan, but HVG called attention to the fact that this was not included in the initial announcement. What kinds of verification will be acceptable concerning the use of the funds will be a separate question.

Negotiations are still ongoing between the government, the National Bank (MNB), and the Hungarian Association of Pension and Health Care Funds to determine if there would be a limit on the number of transactions, or what deadline would be acceptable for payments.

Expectations

The option to use voluntary pension funds for housing tax free is planned to be available only in 2025. During this time, the government expects the following results:

• About HUF 300 billion (EUR 750 million) currently idling in voluntary pension funds could be used for housing
• This could support about 30,000 transactions if we calculate with apartments worth ca. HUF 60 million (EUR 150,000) and a 15% starting contribution.
• This will give young adults better chances to start a family and create a home in Hungary

Rationale

Currently, there are about HUF 2,000 billion (EUR 5 billion) in voluntary pension funds in 1.1 million accounts. More and more people are using this form of savings: regarding the sum of deposits, last year there was a 10% increase compared to the previous year, and this year, the increase was 12% already in the first half of the year.

At the same time, voluntary pension funds and healthcare funds account for only a small portion of savings in Hungary. Last year, shares and funds were among the most dynamically growing forms of long-term investments. At the same time, residential real estate is steadily the most popular form of long-term investment. In Hungary, about 91% of people own their homes, which is the 4^th highest rate in the European Union.

By allowing the use of voluntary pension funds for housing purposes, the government expects a boost to the economy while providing the people better access to their preferred form of investment: property purchase.

Voluntary pension funds on the real estate market

For now, the scheme allowing voluntary pension funds to be used for housing is supposed to be active only in 2025. At the end of the project, results will be evaluated, and further action will be decided on accordingly.

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