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The number of building permits issued in Hungary increased by 15.2% a year to 8,001 in the first quarter, according to data released by the Central Statistical Office (KSH) on Thursday.

The number of permits issued for housing in the capital jumped 174.4% to 2,077, while the number issued for housing in county capitals and towns with more than 50,000 inhabitants fell by 27. .5% to 1,248 and the number issued in smaller towns fell slightly by 2.2% to 2,579. reach 2097.

The Hungarian government has implemented a two-year reduction in the VAT rate on house construction to 5% from 27% from the start of 2021 as part of measures to help economic recovery from the coronavirus crisis.

The number of home completions fell 26.4% to 4,528, showing the impact of a slowdown in the sector after the end of a three-year reduction in the preferential VAT rate on home construction in 2019.

Single-detached homes accounted for 32% of completions in the first quarter. Houses in multi-storey buildings with multiple dwellings accounted for 53% of the total and houses in residential parks 13%.

The average size of new homes was just over 81 m².

The share of housing built by companies was 74%.

Data shows that 367 homes were demolished or condemned in 2021.

Daniel Molnar, analyst at economics researcher Szazadveg, said the housing climate remained strong, as evidenced by the high number of building permit issues. He noted, however, that producer prices in the construction sector are rising, making it more expensive to build houses and labor shortages are an ongoing challenge for the sector.

Magyar Bankholding chief analyst Gergely Suppan said since 2016 almost 202,000 building permits have been issued but only around 116,000 houses have been completed, showing a backlog of 86,000 and indicating serious delays. He said house constructions were still lagging behind pre-crisis levels, international rates and the rate needed to renew the national housing stock.