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22 July 2021

Viktor Orbán announces economic policy decisions

The decisions announced by the Hungarian Prime Minister have a great impact on the construction industry. The Government wants to change the regulations as a result of price raises in connection with subsidies for home renovation.

Budapest


In Hungary, the prices of building materials (steel, EPS, XPS insulation, polypropylene, polyethylene, etc.) have increased in the past months. The changes prepared by the government are aimed at enabling families and people with lower incomes to renovate their flats and build houses. However, multi-million dollar subsidies for families and low-interest loans and VAT exemptions may not be enough if prices continue to rise too quickly.

There are 5 steps to counteract this, announced at the beginning of July:

  1. From October, restrictions on the export of construction materials are to apply as prices for some products have risen due to a sharp increase in foreign demand.

  2. Until then, the Government has to introduce the obligation to notify exports - producers and distributors of materials will be obliged to register their activities on the website of the Ministry of Innovation and Technology and to report on the place of origin of a given product, as well as the transport route.

  3. Moreover, efforts are being made to introduce the right of first refusal for the benefit of the State. The Government will therefore try to keep key building materials in Hungary. Thanks to the registration obligation, the Government will have greater insight into market processes and, if necessary, the State will be able to exercise its right of first refusal.

  4. If selling prices above the government permitted price level are observed, then 90% of the price above that level will be subject to additional tax. This mainly applies to gravel, sand and cement.

  5. Mines that have acquired the right to exploit but are not opened must start operating within one year of obtaining the permit. Otherwise, the acquired right or license will be revoked and transferred to others.


The Prime Minister's chief advisor, Márton Nagy, also pointed out that there are no grounds for a significant explosion in the prices of raw materials extracted from domestic gravel mines, which cannot be explained by, for example, rising global prices of iron and wood. According to him, the Government's decision to withdraw and transfer mining concessions is related to this.

- If mines are stopped or mining is not started, either because of State taxation of extra profit or for other reasons, the State may withdraw these mining rights. The purpose of this measure is to maintain production levels
- said Nagy.

On the other hand, the head of PAIH’s office in Budapest, Marcin Karaskiewicz, sees the current situation as an opportunity for Polish companies to enter the Hungarian market.

On January 1, 2021, the Government program was launched, providing 50% co-financing for the renovation of houses / apartments for families with at least 1 child, up to a maximum of HUF 3 million (approx. EUR 8,500). At the same time, there was a reduction of the 27% VAT rate for the sale of new flats and houses to back to 5%. As predicted, the above-mentioned legislative solutions generated previously unplanned private construction investments, while the growing demand for construction services increased the prices of specialist services and construction materials. The situation may be an opportunity for Polish producers - said Marcin Karaskiewicz.



Polish Investment and Trade Agency

Krucza St. 50

00-025 Warsaw


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