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Tax-Free Withdrawal of Private Pension Savings in 2025: How Will It Impact the Real Estate Market?

Tax-Free Withdrawal of Private Pension Savings in 2025: How Will It Impact the Real Estate Market?

In 2025, a significant change will take effect in Hungary: the government will allow tax-free use of voluntary private pension savings for housing purposes. This decision will not only affect individuals with savings but could also have a substantial impact on the real estate market. In this article, we explore what this opportunity means for homebuyers, landlords, and the real estate sector as a whole, while also reviewing the latest data from the Central Statistical Office (KSH).

What Will Change in 2025?

According to a new government regulation, voluntary private pension savings can be withdrawn tax-free if the amount is used for real estate purposes. This means that the funds can be utilized for:

  • Purchasing a home
  • Home renovations
  • Early repayment of a mortgage
  • Providing the required down payment for a new mortgage
  • Real estate construction

The maximum amount that can be withdrawn is limited to the savings accumulated by September 30, 2024.

Regulation Details

  • Duration: The benefit will be available from January 1 to December 31, 2025.
  • Eligible Uses: The funds can be used for real estate purchases, renovations, construction, early mortgage repayment, or providing the down payment for a new home loan.
  • Beneficiaries: In addition to the account holder, their spouse and children can also use the savings for housing purposes.
  • Maximum Withdrawable Amount: The total balance in the individual pension account as of September 30, 2024.

How Will This Impact the Real Estate Market?

Experts predict that this measure could significantly influence the Hungarian real estate market, as an estimated HUF 300 billion could flow into the sector. But what exactly will this mean for the housing market?

1. Increased Demand for Homes

Since a portion of private pension savings can be used for home purchases, many people will gain the opportunity to enter the real estate market. This could lead to a rise in demand, particularly in the used housing market.

2. Rising Property Prices

With increasing demand, property prices are expected to rise, especially in smaller cities and more affordable housing segments. Those who have been waiting to buy may want to act sooner, as increased competition could drive prices even higher.

KSH Data: Real Estate Market Trends in Recent Years

According to the latest data from the Central Statistical Office (KSH), housing prices have been on the rise in recent years, and this new measure could further boost demand, especially for used homes.

Housing Price Trends in Recent Years

In 2023, overall housing prices were 6.5% higher than in the previous year. Within this:

  • Used home prices increased by 5.1%
  • New home prices rose by 16.3%

While this increase was more moderate compared to previous years, price growth accelerated again in the first quarter of 2024:

  • Used home prices increased by 5.3% compared to the previous quarter
  • New home prices rose by 4.6% (Source: KSH)

Regional Differences and Market Trends

The KSH Real Estate Database shows significant regional variations in housing prices, meaning the impact of this measure may differ across locations. The updated KSH database provides detailed information on real estate price trends by county, municipality, and even street level, allowing market participants to gain a clearer picture of local real estate trends. (Source: KSH)

Who Should Take Advantage of This Opportunity?

  • First-time homebuyers who have struggled to afford a down payment
  • Investors looking to purchase real estate for rental or resale
  • Homeowners wanting to reduce or prepay their existing mortgage
  • Those planning renovations to improve their current home

Conclusion

The tax-free withdrawal of private pension savings in 2025 could provide a significant boost to the real estate market. While individual savings are limited, collectively, hundreds of billions of forints could enter the sector, leading to higher demand and price increases. According to KSH data, housing prices are already on an upward trend, and this new measure is expected to further stimulate demand, particularly in the used home market.

Market participants should closely monitor KSH reports and data to make informed real estate decisions.

For any real estate-related inquiries, feel free to contact the Kenway team with confidence.