Market in Depth

Hungary's house price increases are accelerating again

Lalaine C. Delmendo | January 12, 2022

Hungary's house price increases are accelerating again. Hungary's nationwide house price index soared 14.1% (10.6% inflation-adjusted) during the year to Q1 2021. Supported by improving demand, these latest rises follow y-o-y rises of 6.8% in Q4 2020, 9.9% in Q3, 10.2% in Q2 and 12.5% in Q1, according to the country's central bank Magyar Nemzeti Bank (MNB).

On a quarterly basis, house prices rose by 8.2% (6.3% inflation-adjusted) in Q1 2021.

Pest, the eastern part of Budapest comprising about two-thirds of the capital city's territory, saw the biggest y-o-y price increase of 22% (18.3% inflation-adjusted) in Q1 2021. It was followed by cities located in Southern Great Plain (14.9%), Southern Transdanubia (14.7%), Northern Great Plain (14.6%), Northern Hungary (12.6%), Central Transdanubia (12.1%), and Western Transdanubia (8.4%).

Nationwide, the average price of new homes was HUF 36.1 million (€102,840) in Q1 2021, while second-hand home prices averaged HUF 18.6 million (€52,987).

After falling by almost 18% during 2020, demand is now rising. In Q1 2021, the number of sales rose by 15% from a year earlier, according to KSH. Housing transactions in non-subsidized villages increased 14% y-o-y in Q1 2021 while transactions in subsidized villages rose by 1.9%.

Residential construction activity remains strong. In H1 2021, housing completions rose by 12.8% y-o-y to 9,795 units, following a 33.5% increase during 2020, according to KSH. Likewise, dwelling permits also increased 22.4% y-o-y to 15,274 units in H1 2021, an improvement from last year's 22.1% fall.

The housing market outlook remains positive, with an expected rebound in demand this year after the government reduced the housing tax. Previously, the government had raised VAT on selling residential properties from 5% to 27% by end-2019. But the government recently reduced the tax back to 5%, effective January 2021, to boost the housing market. In addition, the government is also giving grants for home renovations.

The economy is expected to rebound this year, with a real GDP forecast of 6.3%, based on projections from the European Commission, following a decline of 5% last year due to the economic repercussions of COVID-19. Hungary's economy grew by 17.9% in Q2 2021 from a year earlier, after four consecutive quarters of contraction, mainly driven by a rebound in industry, according to the KSH. It was the fastest expansion on record, due to baseline effects and amidst the relaxation of pandemic-related curbs.

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 must gain the approval of the relevant Administrative Office 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 »

Rental Yields

Gross rental yields acceptable in Budapest

Gross rental yields, i.e., the gross return on investment in an apartment if fully rented out, are around 5.6% in Buda, while in Pest rental yields are a little lower, around 5.2%.

These are moderately good yields. The average prices per square metre (sq. m.) of apartments in Buda, the greener side of Budapest, range from EUR 2,000 to EUR 2,200, with higher prices in Pest, the business and commercial centre of Budapest. In Pest prices are around 2,500 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 9.50 to EUR 11.50 per month per sq. m., whereas in Pest, monthly rents per sq. m. range from around EUR 10.60 to EUR 11.00.

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.

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Taxes and Costs

Hungarian taxes are moderate to high

Rental Income: Net rental income is taxed at a flat rate of 15%. 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 15% in Hungary.

Inheritance: The inheritance of close relatives and the surviving spouse is exempt from inheritance duty.

Residents: Resident individuals are taxed on their income at a flat rate of 15%.

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Buying Guide

Buying costs for is low to moderate in Hungary

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.

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Landlord and Tenant

Unregulated rental
market in Hungary is pro-landlord

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 »


Economy recovering rapidly, labour market improving

Hungary’s economic recovery is moving forward at a pace that is “among the fastest in the European Union (EU)”, noted the country’s Finance Minister Mihaly Varga.  Real GDP is forecast to rise by 6.3% this year, according to the European Commission. During 2020, the economy declined by 5%, its biggest contraction since 2009.

Hungary’s economy grew by 17.9% in Q2 2021 from a year earlier, after four consecutive quarters of contraction, mainly driven by a rebound in industry -  the fastest expansion on record, due to baseline effects and amidst the relaxation of pandemic-related curbs.

“Now our goal is to preserve the growth advantage the Hungarian economy enjoys compared to the EU, with pursuing an economic policy based on tax cuts, workplace creation, investment incentives and family support,” said Varga.

Hungary gdp inflation
Quarter-on-quarter, the economy expanded by 2.7% in Q2, after growing by 2% in the previous quarter.

“Household consumption is poised to rebound thanks to steady real income growth, and the increasing ability and willingness of consumers to spend once restrictions are lifted,” said the European Commission.

Unemployment fell to 4% in June 2021, down from 5% a year earlier, according to KSH figures.

The country’s inflation was 4.7% in July 2021, down from 5.3% in the previous month but up from 3.8% a year ago. It also remains higher than the central bank’s target range of 2% to 4%.

Orban’s power grab continues
Since coming to power in 2010, Hungary’s nationalist prime minister Victor Orbán has concentrated power and media organs in his hands, and regularly clashes with Brussels over migration and rule-of-law issues.

Economic growth has boosted his popularity, propelling him and his party, Fidesz (the Hungarian Civic Union) to victory in the 2014 elections, and again in the 2018 national elections, when the Fidesz–KDNP alliance won a two-thirds parliamentary majority, with 133 seats out of 199.

In a move towards the creation of an "illiberal" state, in April 2017 the Hungarian Parliament imposed stringent restrictions on foreign universities, a move primarily directed towards the Central European University (CEU), founded by philanthropist and Hungarian NGO supporter George Soros. Forbidden to accept new students after January 1 2019, the CEU re-launched all U.S. accredited degrees in Vienna from September 2019.

Orban’s growing authoritarianism has met resistance. In May 2017, large anti-corruption street protests occurred in Budapest, expressing support for CEU and NGOs. During the same month, two United Nations Special Rapporteurs also expressed their objection to the Hungarian government’s draft "Bill on the Transparency of Organisations Financed from Abroad" that would limit NGO activities. The bill was eventually passed as law in June 2017.

Orban’s latest target is the University of Theatre and Film Arts in Budapest (SZFE), which the government identified with the “left-liberal” ethos. This coincides with yet another move to shut down the country’s last independent political radio station, Klubrádió. Klubrádió’s broadcasting license, which expired last February 2021, was not renewed forcing it to go off air and the station’s former frequency had been allocated to a station owned by a group close to Orban. The station’s fate has attracted international attention and in June 2021 the European Commission launched an “infringement procedure” against Hungary, which could lead to a legal action.

“We warned the Hungarian authorities and asked them to find a solution so that Klubradio could continue broadcasting” said Vera Jourova, the EU’s commissioner for values and transparency. “They did not act. We now launch an infringement procedure against Hungary for failing to comply with EU telecoms rules.”

Press freedom in the country has continuously deteriorated since Orban returned to power in 2010. Hungary is currently ranked 92nd out of 179 countries on the 2021 World Press Freedom Index by Reporters Without Borders (RSF) – sharply down from 23rd in 2010.

The next general election is scheduled on April 2022.

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