Market in Depth

Highest annual price growth in history

Lalaine C. Delmendo | February 28, 2022

Highest annual price growth in history Hungary's house price increases are accelerating again. Hungary's nationwide house price index soared 22.8% (11% inflation-adjusted) during the year to Q2 2022, according to figures from the Hungarian Central Statistical Office (KSH). Supported by improving demand, these latest rises follow y-o-y rises 16.9% in Q2 2021 and 2.6% two years ago. In fact, it was one of the highest annual price growth recorded in the country's recent history.

On a quarterly basis, house prices rose by 5.2% (0.9% inflation-adjusted) in Q2 2022.

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 33.7% (27.1% inflation-adjusted) during 2021. It was followed by the Northern Great Plain (22.2%), Northern Hungary (21.9%), Southern Great Plain (20.7%), Central Transdanubia (19.9%), Southern Transdanubia (19.7%), and Western Transdanubia (17.4%). In Budapest, the mean price for second-hand homes also rose, albeit at a more modest 9.7% (4.3% inflation-adjusted) y-o-y last year.

Nationwide, the average price of new homes was HUF 45.6 million (€107,862) in Q1 2021, while second-hand home prices averaged HUF 22.8 million (€53,931).

After falling in 2019-20, demand has bounced back strongly last year. The total number of second-hand homes sold rose by 13.8% to 142,138 units in 2021 from a year earlier, a sharp improvement from annual declines of 14.3% in 2020 and 5.7% in 2019. In fact, foreign demand is now recovering, amidst weakening forint against the euro.

Hungary house prices
Yet residential construction activity remains weak. In the first half of 2021, housing completions in Hungary fell by 6.8% y-o-y to 9,133 units, according to KSH. The number of newly built homes dropped by 16.8% in Central Hungary and by 1.9% in Great Plain and North. In contrast, newly built homes increased 21.6% y-o-y in Transdanubia over the same period.

The overall economy remains fundamentally strong. Hungary's economy grew by a robust 7.1% during 2021, following a 5% contraction in 2020 due to the Covid-19 pandemic. In Q2 2022, the economy expanded by 6.5% from a year earlier, following y-o-y expansions of 8.2% in Q1 2022 and 7.1% in Q4 2021, supported by strong private consumption and a rebound in exports, according to the KSH. The country's overall economic growth this year is expected to slow slightly to 5.2%, according to the European Commission's forecast, amidst rising inflation, tightening fiscal and monetary policies, as well as trade disruptions and rising uncertainty due to Russia's war of aggression against Ukraine.

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.

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Robust economic growth, soaring inflation

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, registering a real GDP growth rate of 7.1% in 2021. During 2020, the economy declined by 5%, its biggest contraction since 2009 due to the Covid-19 pandemic.

In Q2 2022, the economy expanded by a robust 6.5% from a year earlier, following y-o-y expansions of 8.2% in Q1 2022 and 7.1% in Q4 2021, supported by strong private consumption and a rebound in exports, according to the KSH.

Finance Minister Varga noted that all branches of the economy – particularly industry, trade, tourism, the financial sector and ICT – contributed to the Q2 growth, with the exception of agriculture, which was hit by drought.

Hungary gdp inflation
“Industry, trade, tourism, the financial and ICT sectors performed well,” said Varga.

Quarter-on-quarter, the economy expanded by 1% in Q2, after growing by 2.1% in the previous quarter.

However, Hungary’s overall economic growth this year is expected to slow to 5.2%, according to the European Commission’s forecast. “The slowdown is expected to affect all demand components and be driven by rising inflation, tightening fiscal and monetary policies, as well as trade disruptions and rising uncertainty in the wake of Russia’s war of aggression against Ukraine. These factors are expected to weigh on growth throughout the forecast horizon: real GDP growth is forecast to decrease from 7.1% in 2021 to 5.2% in 2022.”

Unemployment stood at 3.4% in the three months to August 2022, down from 4.1% in the same period last year, according to KSH figures. The country’s unemployment rate dropped to an annual average of 4% in 2016-21, from 9.4% in 2010-15, based on figures from the IMF.

Though, inflation is now surging. In August 2022, the nationwide inflation rate rose to 15.6%, up from 13.7% in the previous month and 4.9% a year earlier. In fact, it was the highest level recorded since May 1998, driven by a surge in food and other commodity prices. It is also far higher than the central bank’s target range of just 2% to 4%.

Orban reelected for a fourth straight term
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.

Then in 2020, a board of trustees appointed by the government has taken over the management of the Budapest-based University of Theatre and Film Arts (SZFE) and has abolished the university’s autonomy.

This was followed by 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 has recently lead to a legal action. In July 2022, the European Commission decided to refer Hungary to the Court of Justice of the European Union, stating that its decision to reject Klubrádió’s application to use the Budapest 92.9 MHz frequency was made on “highly questionable grounds” and had applied rules in a “disproportionate and discriminatory manner”, thus violating the freedom of speech as enshrined in the Charter of Fundamental Rights of the EU.

Press freedom in the country has generally deteriorated. Hungary is currently ranked 85th  out of 180 countries on the 2022 World Press Freedom Index by Reporters Without Borders (RSF) – up from 92nd in 2021 but sharply down from 23rd in 2010.

“Prime Minister Viktor Orbán, whom RSF has deemed a press freedom predator, has built a media empire whose outlets follow his party’s orders. Independent media maintain major positions in the market, but they are subject to political, economic, and regulatory pressures,” said the RSF.

Despite all these, Orban won a fourth straight term in power during the April 2022 general elections.