Page 58 - CE Outlook Regions 2022

The government is providing €570mn grants in tenders to some
35,000 households, mostly with below-average income, for the
installation of home solar panels and energy-efficient heating
systems. It is pre-financing costs from the budget due to the
delay in transfer of RRF funding.

Utility prices will be a key campaign topic next year, as the PM
candidate of the opposition, Marki-Zay, has hinted he would
terminate fixed retail energy prices. The government takes credit
for reducing gas and electricity bills for households after it froze
prices ahead of the 2014 election. Hungarian gas and electricity
prices are the cheapest in the EU, but when adjusted to
purchasing power, Hungary ranks in the middle.

Fixed prices may also be chosen by SMEs below a certain
annual revenue. At present, the entire industrial electricity
consumption and 95% of gas consumption are adjusted to market
prices, according to the National Bank, which estimates that
companies spent roughly HUF264bn on natural gas and
HUF915bn on electricity in 2020.

3.3.5 Construction

Hungary's construction sector recovered quickly from the
downturn caused by the pandemic, but since then the pace of
growth has slowed and the sector has yet to reach pre-crisis
production peaks. The sector is expected to produce double-digit
growth in 2021 and 2022, supported by the new EU budget cycle
and the expected drawdown of EU funds as well as
government-funded investments.

The government’s HUF3mn renovation subsidy scheme, the
reintroduction of the 5% VAT on new homes from 2021, the home
purchase subsidies, will also continue to provide a substantial
boost to the residential home market.

Rising base material prices, the labour squeeze and the delay in
delivery pose significant downside risks. Hungary’s leading real
estate brokerage Duna House expects home prices to rise 5-10%
on average in 2022, around the same pace as in 2021.

Mortgage lending hit a new record in 2021, but rising interest
rates could dent demand in 2022. The central bank’s green
mortgage loan capped at 2.5% could be the driver of home
lending. Rising inflationary environment may bring more investors
back to the market who fled the market after the short-term rent
market collapsed in 2020.

Roughly three-quarters of companies are preparing to raise
prices in the next three months, according to fresh data by

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