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Last Updated: Aug 15, 2016

Hungary has experienced an amazing property bull market for the past two years, but a slowdown appears imminent.

During 2015 house prices increased by 17.71% (17.78% inflation-adjusted), according to FHB Bank's estimate.  Figures from the Hungarian Central Statistical Office (KSH) are lower - according to KSH, prices of existing dwellings rose by 11.71% (11.78% inflation-adjusted) in 2015, while prices of new dwellings increased by 6.67% (6.74% inflation-adjusted).

In Budapest, Hungary's capital, the mean price of existing and new dwellings increased by 15.53% (14.93% inflation-adjusted) y-o-y in Q4 2015, according to KSH.

In 2015, credit for second-hand homes rose by 36.5%. Dwelling permits issued were up 38.8% y-o-y during the first quarter of 2016 - boomtime growth figures!

However, although total housing transactions rose by 4.9% in 2015, most growth took place in the first half of the year and was concentrated in second hand homes.  A slowdown appears imminent.  In Q1 2016, Hungary's GDP slowed sharply with only 0.9% growth y-o-y, the slowest for three years, according to the Hungarian Central Statistical Office (KSH). The meagre expansion was due to weak construction and weak industrial growth. The OECD lowered this year's economic outlook for Hungary from 2.4% to 1.6%.

Obviously Hungarian real estate agents were very happy in 2015!  During the first nine months of 2015, selling times plunged in comparison to the same period in 2014, according to Otthon Centrum (OC).
  • Blockhouse flats required 1.5 months to sell on average, 43.37% less than in 2014.
  • Brick-built flats required 3 months to sell on average, 27.64% lower.
  • Brick-built family homes required 7.5 months to sell on average, down by only 1.35%.

Part of the recovery in housing demand 2014-5 was caused by the government increasing, at the beginning of 2013, the amount of 5-year loan subsidies, the maximum value of subsidized loans, and the loan house price threshold. These measures causing significantly stronger credit demand in the second half of 2013. Demand continued to rise in 2014 and 2015, according to KSH.

A non-refundable subsidy, the family housing allowance (CSOK) became available from July 1, 2015.  It can be used for buying new- and used homes, for apartment expansions, and for home construction.

On December 15, 2015, the National Assembly lowered the VAT rate for new dwelling units to 5% from the previous 27%, in a further attempt to boost the property market. The new VAT rate will be effective from 2016 to 2019. The amendment also contained other measures to improve construction sector's performance and reduce red tape, according to the Ministry for National Economy.

Purchases of real estate in Hungary by foreigners
Hungary house prices Hungarian law requires that real estate purchases shall be concluded through private contract (purchase agreement) countersigned by a lawyer. Non-Hungarian citizens are further obliged to gain the approval of the relevant Administrative Office in order to purchase property as a private person. According to regulations most foreigners should receive a permit within 2-3 months.

Most lawyers advise foreign nationals to set up a company registered in Hungary in order to purchase property. In this case, no permit is needed. This is a fairly swift and easy procedure (taking 1-2 days), and all expenses can be written off.

Analysis of Hungary Residential Property Market »

Last Updated: Jul 25, 2016

Gross rental yields, i.e., the gross return on investment in an apartment if fully rented out, range from 6.89% to 7.21% in Buda, while in Pest rental yields are a little lower, ranging from 5.82% to 6.42%.

These are good yields. Two years ago we found higher yields in Pest, it is not clear to us whether there has been a genuine change or whether this is some sort of sampling problem, but our research confirmed the trend this year.

The average prices per square metre (sq. m.) of apartments in Buda, the greener side of Budapest, range from EUR 1,798 to EUR 2,017, with higher prices in Pest, the business and commercial centre of Budapest. In Pest prices are around 2,350 per sq. m..

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 11 to EUR 11.60 per month per sq. m., whereas in Pest, monthly rents per sq. m. range from around EUR 11.20 to EUR 12.70.

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 08, 2016

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, 2016

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: Aug 15, 2016

Hungary's economy to slow in 2016

Hungary gdp inflationThere was good growth in Hungary in 2015, with GDP expanding by 2.9%, well above the euro area's (1.6%) and the European Union's (1.9%) growth rates. The recent growth was lower than the 3.7% growth in 2014, but still an improvement from 1.9% in 2013 and a 1.7% contraction in 2012.

Growth was fueled by lower oil prices, which boosted domestic demand. There was high private consumption (3.2% y-o-y growth), increased fixed investment (6.5% y-o-y growth), and higher government consumption (6.7% y-o-y growth).

However in Q1 2016, Hungary's GDP growth sharply slowed to 0.9% y-o-y, the slowest in three years, according to the Hungarian Central Statistical Office (KSH), due to weak construction spending and weak industrial growth. The OECD lowered this year's economic outlook from 2.4% to 1.6%, although the OECD retained its 3.1% prediction for 2017.

From 1997 to 2006 Hungary enjoyed robust economic growth of about 4% per annum. Then in 2007 growth slowed sharply to 0.43%, and 0.84% in 2008. In 2009 GDP shrank by 6.6%, Hungary´s 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 prevent the Hungarian economy from collapsing.

The economy returned to growth in 2010, with growth rates of 0.7% in 2010 and 1.8% in 2011. However it contracted again by 1.7% in 2012, amidst high debt, high unemployment and the Eurozone debt crisis.

By 2015, Hungary's fiscal deficit was only 1.9% of GDP, after deficits of 2.3% in 2014, 2.6% in 2013, and 2.3% in 2012. Hungary's credit rating was upgraded by Fitch Ratings to "investment grade" in May 2016, raising its long-term rating from BB+ to BBB- and with a stable outlook.

"We expect a similar positive decision by the other two main rating companies after the upgrade by Fitch, " said Hungary's Economy Minister Mihaly Varga.

Hungary's unemployment rate in Q1 2016 was 6%, a decline from 7.8% the same quarter last year. in April 2016, consumer price in the country rose by 0.2% y-o-y.

  • 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): €2,375 For a 120 sq. m. property, usually an apartment.
Rental Yield: 6.42% For a 120 sq. m. property, usually an apartment.
Rent/month: €1,524 For a 120 sq. m. property.
Income Tax: 12.00% 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.

Baltics Real Estate Market Overview 2016 - Colliers InternationalPoland Residential Market Q2 2016 REAS
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