New 3% housing loan to first-time owners in Hungary

Available to foreign nationals as well

In Hungary, home ownership is considered a major milestone of adult life, especially as the vast majority of Hungarians own as opposed to rent (about 90%). To support young people acquiring their first home in Hungary, the government has launched a new loan scheme called Otthon Start Program which provides a 3% housing loan to eligible applicants. The program is available not only to Hungarian nationals but also to EEA nationals and third-country nationals who have permanent residency in Hungary; the rule of thumb is that if you have a plastic address card (so not just the accommodation slip with the QR code), you will probably be eligible (while meeting the requirements for property purchase as a foreigner).

Who can apply for the FIX 3% loan?

The main idea was to support people who are buying a home for themselves for the first time. Later this was relaxed to include people who had an at most 50% share in residential property over the last 10 years in Hungary. You can apply for the FIX 3% loan alone or with your spouse; your parents may be added as additional debtors, but they cannot obtain a share in the property.

Beside having a plastic address card, you will need to be enrolled in the Hungarian social security system for at least 2 years before the application.

Max. HUF 50 million for 25 years

The FIX 3% loan of Otthon Start Program is much more favorable than other, market-based housing loans. Most importantly, the interest rate is only 3%, as opposed to the 7-8%, or even higher interest rates available on the market. Additionally, Otthon Start also has fewer restrictions than other subsidies like CSOK: it includes a wider variety of applicants and a much wider variety of homes. The home can be both an apartment or a house, newly built or not, in a highly populated town or in the countryside. Only the price range is defined:

• At most HUF 100 million (ca. EUR 250,000) if it is an apartment
• At most HUF 150 million (ca. EUR 375,000) if it is a house
• The price per square meter can be at most HUF 1.5 million (ca. EUR 3,700)

To apply for this housing loan, at least 10% of the price must be already available to applicants; this is a significant benefit compared to the at least 20% that is usually required. At the same time, the loan itself can be at most HUF 50 million (ca. EUR 125,000), so if the home is more expensive, the original contribution must obviously be higher. The maturity of the loan cannot be longer than 25 years, so monthly repayments will be calculated accordingly.

• Interest rate: 3%
• Maturity: at most 25 years
• Loan: at most HUF 50 million (ca. EUR 125,000)
• Own contribution: at least 10%

Impact on the Hungarian real estate market

Since Otthon Start is obviously much more favorable than market-based loan schemes, it is expected that more people will try to buy a home in the near future. Demand will increase, which may easily drive up prices. At the same time, the amount of real estate for sale may also increase – but since the market itself is finite, this would remove rentals from the market, which could in turn increase the rent of property that remains rental.

Additionally, while the purpose of the program is to provide affordable accommodation to a wider population, using the program for investment purposes is not explicitly excluded. Natural persons who are not individual homeowners may also take advantage of the new housing loan scheme and buy residential property for investment, then rent out the property themselves, driving rental prices further up.

Meanwhile, the restrictions of Otthon Start will probably also have a levelling effect on purchase prices. Since sellers will also want to take advantage of the new housing loan through finding buyers more easily, they should not raise prices so high as to disqualify their property. Sellers might even lower their originally higher prices in hopes of finding buyers more quickly – this might affect new builds the most.

In general, it is expected that the time each piece of property spends on the market will shorten. Since the first announcement in July, it seems that many buyers who had been hesitating have made pre-contracts and prepared to apply for the new housing loan as soon as it becomes available. FOMO (the Fear Of Missing Out) is expected to increase the number of transactions in the coming one or two quarters. After that, the trend will probably turn, and the number of transactions might go back to previous levels, or even lower.

Helpers Hungary at your service

Helpers Hungary is a leading provider of business and personal services to international clients in Hungary. We provide assistance not only with business setup and residency application, but also with various other fields connected to Hungarian administration, such as property purchase, including property search and licensing (if necessary).

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