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.
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 »
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.
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%.
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.
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.