| 1. Investing in Hungary |
| 2. Purchase process |
| 3. Districts |
| 4. F.A.Q. |
1. Investing in Hungary
Budapest: is a beautiful city with exquisite buildings, world famous baths and hospitality loving natives. This is possibly one of the most beautiful, if not the most beautiful city in the world. One thing is certain, once someone visits Budapest – they sure to fall in love with it. Perhaps what is most important for you – especially since you are not reading this by accident – is the fact that it still offers excellent investment opportunities. Allow us to be your guide in this beautiful city and give you a short summary of why this is a city of excellent real estate investment opportunities.
We hope that our website provides you will all the information you need to give you an overall idea of the Hungarian real estate market. If you have further questions that were not answered there, our professional colleagues are always at your service.
1. Budapest: An European capital that you will feel you’ve always known.
Due to its history and geographic location, Hungary had always enjoyed the status of being the most European and most western country in the Eastern European region. It is very close to the developed Western countries in culture, economic development and legal structure. Those arriving in Budapest immediately find that they have arrived in an European capital city and as such may purchase real estate as simply and clearly as it had become a standard in other European countries. The entire procedure moves along quickly and smoothly.
It is our experience that people find it easier to invest in a business climate they find familiar. This city is in dynamic motion with significant developments throughout the city in part self financed and in part with the financial assistance of the European Union. Some of these are the new construction of the fourth metro line (to serve the 2 million residents of the capital city); the government had appointed the new administrative quarter that will represent the largest investment in the city for the coming years; remodeling of entire city sections is underway. Everything is in place for Budapest to become a newly discovered world scale capital.
Ascension to the European Union – or the great property boom
Although Hungary joined the European Union in 2004, you need not worry about having missed anything. The great property boom experienced by Ireland, Spain or Greece upon joining the EU is still ahead of Hungary. Although during the past five years, on the average Budapest had experienced a healthy annual 10% increase in capital appreciation. Specialists predict that the expected big boom in the real estate market is still to come. On what do they base their opinion?
1. Introduction of the Euro: In this case it is not so much the actual introduction of the currency that is important, rather the conditions established in preparation of the event that may be significant elements.
In order to make it possible to install the Euro as the official currency, Hungary must lower the interest rates that are higher than the European average. The reductions of interest rates will in turn make mortgages available to a greater number of people. This last step is already well under way.
Due to inexpensive available mortgages, more and more people can afford to think about purchasing real estate. This increased demand will bring with it a rapid increase in prices.
2. Budapest is a Central European capital city with average real estate market prices much lower than in other European capitals. One does not need to go as far as London or Paris for a comparison – using the base prices of Vienna, a short two hour drive away (only 150 miles away) a city with which Budapest shares a common history, allows for a close comparison. At this time there is a significant difference in market prices of these two cities.
Even the market prices in Prague are already surpassing the average real estate prices in Budapest. Anyone who had already been to Budapest will surely agree with the experts that this gap must decrease.
Naturally, in light of investments, we are still in the phase before such a boom in the market and perhaps that is what makes this the most opportune time to invest in Budapest!
The key question when purchasing real estate for investment is always the possible return on your investment. The real estate market in Budapest is well developed with some excellent properties available – of course, the characteristics of the property play a key role – and the market is continuously developing. It is also easy to find reliable, long-term tenants who may stay for 2-3 years. We have several years’ experience in the letting business in London and we can state that the Hungarian market is a breath of fresh air to investors who are familiar with the London or any other market within the UK. In addition, Hungarian laws are much stricter with non-paying tenants making it possible to evict them rather quickly rather than experience some of the maddening situations that can occur in the UK.
2. Purchase process
Procedure for an ideal real estate purchase - useful tips from our expert:
Never make a choice immediately, although there is such a thing as having too many choices. I believe, the ideal house hunting process is as follows:
1) Internet: choose 4-5 of the websites or agencies that you consider the most informative and attractive.
2) Contact them and then pay attention: Compare the quality of their services; how long it takes them to get back in touch with you; how quickly do they respond to your questions, are they truly familiar with the Hungarian real estate market (a golden rule, that a professional living on location will always have more accurate knowledge of the market)
3) Narrow down your choices to 2 or at the most 3 agencies you consider best
4) Choose the best investments and find out everything you can about them. Make a priority list
5) Plan your visit well so you will have time for all the necessary details. Be wary of agencies that are not open about the program they propose for you. (Don’t you wonder why they don’t inform you ahead of time? Are they keeping you away from other, perhaps more suitable investment choices, or they don’t yet have an idea where they will take you? In either case, your opportunities are being narrowed and that is not giving you the best opportunity.
6) Once you are in Budapest, look at only the chosen properties – more than 4 would be overwhelming your senses thus disabling you from making a well considered decision.
7) If you are purchasing new or to be built units, it is always a good idea to meet the developer in person. A good presentation is more than the agent picking you up at your hotel, taking you to the location and giving you the same information you’ve already been given by e-mail. This will not really make you smarter. Getting a feel for the people who plan and perform the construction, seeing them in their offices, will better help you in making a decision. Be sure to ask for references.
8) Finally - don’t forget to relax. Remember, you are in Budapest, one of the most beautiful cities in the world. As long as you are here – enjoy yourself.
9) Finally, wait a day or two, think about things again, consider the aspects – pro and con, then make your decision.
3. Districts
DISTRICT V
DISTRICT V is the most prestigious district of Budapest, the so-called “historical downtown”, with beautiful, 100-year-old classical buildings designed by famous Hungarian architects. These buildings impress the visitors the most: their delightful period features and elaborate ornaments make a lasting memory. According to our experience, there is strong demand for apartments in this area, particularly in the luxury segment, due to the fact that the number of available properties is very limited. District V hosts the Parliament Buildings and many Ministries and this is the main financial district as well: the head offices of numerous banks are situated here. This area is the most popular amongst foreigners who decide to relocate to Hungary, they are likely to set up their new homes here, where they can enjoy the bubbling social life of a cosmopolitan city in a special, period atmosphere. District V is determined by its close vicinity to the river Danube and the most famous shopping street of Budapest, Vaci utca, which is lined with designer shops, stylish bars and elegant restaurants. As a result, District V real estates are safe investments and strong capital appreciation can be expected here. Apartments are easily rentable for an excellent rental yield. But be aware, location is not the only parameter you have to consider: in terms of rental and investment quality is another key factor. High quality and exceptional architecture feature a good investment. There are very few newly-built properties in the area (since there are no building sites left) so loft conversions are the perfect solution for this problem and they are extremely popular lately.
DISTRICT VI
DISTRICT VI is the centre of social life in Budapest. The capital’s most exclusive road, Andrassy Avenue runs across it, which is on par with the prestige of New York’s 5th Avenue, Paris’s Champs-Elysées and London’s Regent Street. Andrassy Avenue, lined with ancient trees and architectural masterpieces, has been the centre of glittering life in Budapest for many years. Andrassy Avenue is protected by the UNESCO World Heritage because of its unique atmosphere and picturesque architecture. The area is determined by its high-profile offices, elegant shops, bars and restaurants. Andrassy Avenue is crossed by “the Broadway of Budapest” where numerous theatres and musical venues can be found. The highlight of the capital’s cultural life is the magnificent Opera House adorning Andrassy Avenue. In District VI you can expect similar capital appreciation and rental yield as in District V, but District VI real estates are of slightly lower price range. The New Government Quarter will have a positive effect on the areas nearby, it will boost the rental market and a high capital growth is expected. You can find the best investment developments of this area in our range of choice.
DISTRICT VII
DISTRICT VII is the historical, Jewish quarter of Budapest and contains many synagogues and architectural monuments. It is situated next to Varosliget, the “lung of Pest”, the biggest green park of the capital which offers a wide range of relaxing and entertainment facilities for all age groups. As the city centre is expanding, District 7 is already considered to be part of it. The area is predicted to become a hotspot of the Budapest property market, especially those parts close to the new tube line (link No.4). District VII is an excellent place for investment and the key factor is to choose the best location. According to experts newly-built properties are more easily rentable in this district so they prove to be better investments as well.
DISTRICT VIII
DISTRICT VIII is a fast developing part of the capital where the cheapest priced apartments can be acquired for this central location. Substantial governmental subsidy is invested in the restoration and rehabilitation of the area, many new developments and renovated classical buildings assist this process. Significant capital growth is expected for middle and long term investments. There are many new developments in the area, the district is improving fast - therefore it is important to consider which parts are the best to invest. These newly-built apartments will be completed at the same time, hereby making their rental a bit more difficult. It is recommended to buy at developments where there is a low number of apartments and close to the “hotspots” of the district. We advise you to buy newly-builds in this district, because resale apartments and buildings are often quite dilapidated.
DISTRICT IX
DISTRICT IX is an up-and-coming area that is determined by its close vicinity with the river Danube and the city centre. This lively district contains cultural and entertainment centres, universities, stylish cafes and bars, and benefits from excellent transport links. Thanks to the National Theatre and the new cultural quarter the area is more popular than ever. There are some derelict regions, but experts agree that those parts close to the river Danube are safe investments.
DISTRICT XIII
DISTRICT XIII is a popular residential area from where the city centre can be accessed fast and easily. Its style and architecture is diverse, the more central parts are elegant and exclusive, the newer parts show a modern, urban picture. Budapest’s biggest Shopping Centre is also situated here, and behind this shopping centre the new Government Quarter of the Hungarian Ministries will be built. The district benefits from excellent transport links (tube, tram and bus lines) which ensure easy access to any part of the capital. Thanks to the Government Quarter a significant amount of governmental support will be invested in the development of the district and its transport. A new kind of waterfront building complex is worth mentioning in District XIII – the “Dockland of Budapest”. The district is highly recommended for rental and investment purposes.
DISTRICT XVI
DISTRICT XVI is situated in the garden suburb of Budapest and contains several new family houses and developments. The area has improved extremely fast in the past 2-3 years. There is a trend in Hungary for young couples and families to move out of the hassle of the city centre, this area is widely popular amongst them. With its competitive prices and promising rentals it becomes more and more favourable between foreign investors as well. It may be the next “hotspot” of the Budapest property market. Excellent entry-level investment: competitive prices, good rental yield and safe investment!
4. F.A.Q.
1. Can I buy a property in Hungary?
Of course you can. You can buy one property as a private individual and two if you are a European Union citizen. If you purchase as a company you can buy as many properties as you like.
2. Shall I buy as a private individual or as a company? What do the experts recommend?
Our clients often have doubts whether to purchase as a private individual or as a company. According to our legal advisors and our own experience we recommend that you buy as a private individual, if: you are a first-time buyer or the property in question is of a lower value. Hereby you can minimise the initial costs and reduce the necessary administration. As a private individual you can acquire a higher proportion of mortgage.
Should you consider buying more than one property and these are of higher value: it is recommended that you set up a company. This means some initial costs but several expenses can be accounted during the financial year.
Advantages of setting up a company:
- you can purchase multiple properties
- all related expenses are deductible (travel, refurbishments, legal and management fees, stamp duties, and other relevant expenses)
- you can sell property and company simultaneously, eluding a stamp duty charge for the buyer (subject to only 16% capital gains tax)
Please contact us for a detailed information pack prepared by our legal advisors on the legal background of purchasing a property in Hungary; it will assist you in finding the most suitable solution for your demand.
3. What additional costs can occur during the purchasing process and when do I have to pay them?
The costs that can occur during the purchase process:
Lawyer’s fee: this is usually 1% in Hungary.
Stamp duty:
| Second hand apartments: | 2% up to 4. 000.000, - HUF (equals 80. 000, - HUF), 6% over 4.000.000, - HUF |
New developments:
- Up to HUF 15 Million – free of stamp duty
- HUF 15-30 Million – 6% for the difference (total purchase price less HUF 15 Million) - this is called "stamp duty discount"
- Over HUF 30 Million – 6% for the total purchase price
Stamp duty is payable in 6-12 months after signing the final contract, upon receipt of a bill from the authorities.
We offer to prepare a detailed calculation for our clients in order to avoid any “surprise” in the future. We list all the costs that can occur and when they are payable, so you will be able to organise your finances and make a decision holding all the information you need.
4. Are Hungarian properties Freehold or Leasehold?
In Hungary all the properties are Freehold.
5. What is the smallest deposit I can purchase from?
We have managed to negotiate very competitive payment schedules with our developers. In general, apartments can be acquired with a 15% deposit. Thanks to our mortgage experts we can assist you in getting a mortgage up to 80% of the purchase price (which is exceptional in the Hungarian market).
6. Should I buy a newly-built or a resale property?
Newly-built properties are usually better investments for foreign investors.
1. There is builder’s guarantee on the building and the interior of the apartment so whatever breaks it will be fixed. It means that you don’t have to spend anything on your property in the first 5 years or so.
2. Tenants prefer newly-builds
3. The common maintenance fee is lower
4. It is a prestige to live in a newly-built
5. Buildings are always equipped with lifts
6. Utility costs are lower
All in all, newly-builds are more easily rentable and a better rental can be achieved with them.
Resale properties:
Advantages: in Budapest there are many beautiful classical buildings that are part of our historical treasure.
Disadvantages: these buildings are often in a very dilapidated state. You can refurbish your own apartment but not the whole building: the hundred-year-old pipes, wires and drains can break anytime causing some inconvenience for you, not to mention the extra costs. These buildings are not always equipped with lifts. Common maintenance is fee is higher which makes it harder to rent them out.
Should you fall in love with these beautiful, impressive buildings, loft conversions may mean the perfect solution for you: in this case the developer renovates the whole building to the original look. They build in a lift, remove the original roof structure and put a few extra stories on top, meaning that the apartments will be fully newly-built: new walls, wires and pipes etc. We have the complete range of these loft conversion project on offer.
If you like the idea of buying a resale property, there are a few delicacies on the market, you only have to find them. In renovated buildings, beautifully refurbished apartments in excellent locations – we tried to find these for you.
7. Do I have to travel to Hungary to purchase an apartment?
Not necessarily. The whole procedure can be arranged from the UK.
However, we recommend that you travel to our country if you have time: visiting the developments, meeting the developers and a letting agent would help you to find the best investment.
We are happy to assist you in arranging your trip for free: which flight you should take, which hotel you should choose within your budget. Our driver will pick you up at the airport and will give you a lift to your hotel and to your meetings.
We find it important that you receive all the information you need to make your decision.
8. What costs can occur during a year in relation to my property?
The good news is that all property related costs (utility bills, telephone bills etc.) are to be paid by the tenants.
In Hungary there is no such a thing as "council tax".
The common maintenance fee (which includes the lighting of the communal areas, maintenance of the building and the elevators, cleaning etc) is also payable by the tenants. Although it is lower in the case of a newly-built property.
9. What investing period do you recommend in Hungary?
According to experts and our experience middle-term (about 5 years) investments are the most ideal in Hungary. However, there are a few developments where significant capital appreciation can be achieved within 1-2 years.
10. Am I in time to invest in Hungary?
The Hungary property market is before the “big boom” that took place in Ireland, Spain, and Greece after they joined the European Union and introduced the EURO. Budapest real estate prices have not caught up with the prices of other capitals in the European region yet, but experts predict this to happen in the next few years. So the timing is perfect, you have to invest in Hungary now.