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Last Updated: Feb 13, 2014

Hungary’s housing market is still depressed, after four years of house price falls. The nationwide house price index dropped 8.17% in Q1 2013 (-10.83% inflation-adjusted) y-o-y, according to FHB Bank.  House prices in the capital Budapest have dropped 8.19% (-9.83% inflation-adjusted) y-o-y, according to BIS.

Construction, building permits, mortgage lending, and prices are at catastrophically low levels compared to the height of the boom.  Bad loans are high.  Newbuild construction hardly exists; buyers are choosing used properties instead. However there are some signs of recovery:  GDP is likely to rise 2.5% this year, and rents are rising.

During Hungary’s housing boom (1998-2007), house prices soared by 264% (102% inflation-adjusted).  However, the market started to fall in 2008, mainly due to the global financial meltdown.

Hungary house prices House prices in Budapest have dropped sharply between 2008 and today, according to KSH:
  • In 2008, house prices fell by 1.7% y-o-y (-5.7% inflation-adjusted)
  • In 2009, house prices fell 11.34% (-15.73% inflation adjusted)
  • In 2010, house prices rose by 0.11% (-4.05% inflation-adjusted)
  • In 2011, house prices fell 3% (-6.79% inflation-adjusted)
  • In 2012, house prices fell 5.57% (-10.36% inflation-adjusted)

Longer selling times are observable for all property types. Selling blockhouse flats required 3 months on average, an increase of 26.67% from the 2012 figure. Brick-built flats required 4.5 months on average, an increase of 15.52%. Selling time for brick-built family homes also increased by 7% to 6.57 months on average.

Analysis of Hungary Residential Property Market »

Last Updated: Jul 03, 2014

Gross rental yields, i.e., the gross return on investment in an apartment if fully rented out, range from 5.35% to 7.97% in Buda, while in Pest rental yields are even higher, ranging from 6.89% to 8.30%. These are quite attractive yields.

The average prices per square metre (sq. m.) of apartments in Buda, the greener side of Budapest, range from EUR 1,280 to EUR 1,900, with an average price of around EUR 1,400 per sq. m. In Pest, the business and commercial centre of Budapest, average prices per sq. m. are a little higher.

Smaller apartments tend to be cheaper (on a per square metre basis) both in Buda and in Pest.

Rents in Buda range from around EUR 7 to EUR 10 per month per sq. m., whereas in Pest, monthly rents per sq. m. range from around EUR 8 to EUR 11.

When buying property, take into consideration that round trip transaction costs are quite high in Hungary.  See our Property transaction costs analysis in Hungary and  Round-trip residential property transaction costs in Hungary, compared to the rest of Europe.

Read Rental Yields  »

Last Updated: Feb 06, 2015

Rental Income: Net rental income is taxed at a flat rate of 16%. When computing for taxable income, income-generating expenses are deductible from the gross rent.

Capital Gains: Net capital gains are taxed at a flat rate of 16% in Hungary.

Inheritance: Death duty is imposed at progressive rates and the applicable tax rates vary depending on the relationship of the beneficiary to the deceased. In case of lineal descendants, there is no inheritance duty on legacies.

Residents: Resident individuals are taxed on their income at a flat rate of 16%.

Read Taxes and Costs  »

Last Updated: Feb 09, 2015

Roundtrip transaction costs are around 7.09% to 14.21% of the property value. Transfer tax is levied at progressive rates, from 2% to 4%. Real estate agent’s fee is around 3% to 5% plus 27% VAT. First transfer of property is subject to 27% VAT.

Read Buying Guide  »

Last Updated: Jun 05, 2006

Hungary’s rental market is generally pro-landlord. New tenancies in Hungary are generally unregulated, with the exception of state and municipal property.

Rents: The parties are free to negotiate rents, and to negotiate the method of any increase in rent that they may wish to devise. The deposit, its rate and other conditions can be freely agreed by the contracting parties.

Tenant Security: The tenancy agreement may be concluded for a definite term, or an indefinite term, or until the occurrence of a certain condition defined in the agreement. The landlord must give a termination notice to the tenant prior to the expiration date of the contract.

Read Landlord and Tenant  »

Last Updated: Feb 13, 2014

Hungarian economy weak, but some recovery

Hungary gdp inflationFrom 1997 to 2006, Hungary enjoyed robust economic growth of about 4% per annum. Economic growth slowed sharply to 0.13% in 2007 and 0.74% in 2008. Then in 2009, real GDP shrank by 6.7%, the worst economic contraction since 1991.

In October 2008, the government was forced to ask the International Monetary Fund (IMF) and the European Central Bank (ECB) for a rescue package worth US$25 billion to restore financial stability and prevent the Hungarian economy from collapsing.

After the election of Prime Minister Viktor Orban in 2010, the new government nationalized US$13 billion worth of private pension-fund assets, and domestic banks were forced to convert their foreign-currency denominated mortgage loans to Hungarian forints.

The Hungarian economy returned to growth in 2010, with real GDP growth rates of 1.1% in 2010 and 1.6% in 2011. However, the economy contracted again by 1.7% in 2012, amidst high debt, high unemployment and the Eurozone debt crisis.  But by mid-2013, Hungary's economy began to grow again.  Growth in Q4 2013 may have reached around 2.5% compared to the previous year.

Key economic facts:
  • In Q4 2012, Hungary’s fiscal deficit was about 2.3% of GDP.  In 2013 the deficit for the first three quarters remained at 2.5% of GDP.  
  • Gross public debt was about 79% of GDP last year.
  • Unemployment stood at 10.7% in the fourth quarter of 2012, and is projected to increase to 11.1% this year, according to the IMF. 
  • In 2013 the average price rise was 1.7%.

In an effort to buoy the struggling economy, the National Bank of Hungary (MNB), the country’s central bank unveiled the introduction of the program called “Funding for Growth Scheme”, aimed at increasing lending to businesses and reducing companies’ exposure to foreign currency denominated loans.

Under this program, commercial banks would get up to HUF250 billion (US$1.1 billion) in interest-free loans from the NBH while companies would get the same amount to convert their foreign currency denominated loans to forints. The program will start in June.

In addition, the NBH plans to use €3 billion (US$3.82 billion) of its foreign currency reserves to help local banks cut their short-term currency debts.

  • Good yields in Budapest
  • Low to moderate transaction costs
  • The law is pro-landlord
  • Minor ownership restrictions
  • Moderate to high rental icome taxes
Price (sq.m): €1,528 For a 120 sq. m. property, usually an apartment.
Rental Yield: 7.55% For a 120 sq. m. property, usually an apartment.
Rent/month: €1,154 For a 120 sq. m. property.
Income Tax: 18.72% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income.
Roundtrip Cost: 10.65% The total cost of buying and then reselling an apartment. Includes:

* all transaction taxes and charges:
* lawyers' and notaries' fees
* agents' fees

Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000.
Cap Gains Tax: 16.00% Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation.
Landlord and Tenant Law: Neutral Rating is based on a detailed study of each country’s law and practice.

Baltic Property Market Report 2015 - NewsecBaltic Investment Market 2015 - NewsecResidential Poland 2015 - REASResidential Market in Poland Q1 2015 - REAS
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