BUDAPEST

 

A City of culture and therapeutic waters

 

 

Hungary's accession to the EU in May 2004 gave the country both economic and political stability and has raised awareness of its beautiful city throughout Europe and the rest of the world.. 

 

Hungary has enjoyed economic and political stability for a reasonably long period, and EU accession this year augments investor confidence in the country.  Budapest also benefits from a unique heritage manifested in it splendid architecture and cultural traditions, and with its location on the Danube it is unarguably one of Europe’s most beautiful cities.  These factors combine to make Budapest an attractive prospect for property investment virtually ensuring long-term capital growth and a healthy return on investment.

 

Property prices in Budapest over the last year surged by 15-20%, and in some districts prices went up by as much as 30%. Yields of 6-8% are being achieved. Real estate prices in Budapest are currently 25-35% lower than in comparable European cities.  . Expectations are that property prices in Hungary will continue to rise at a steady 15-20% annually. There are a number of key drivers behind these expectations.

·         Hungary has gained the confidence of some of the world’s largest companies: General Electric, Coca-Cola, Citibank, Ernst & Young and IBM have all invested in Hungary. In fact, foreign Investors have established around 30 000 companies in Hungary since 1990.

·         The Financial Times reports that EDS, a US based business service outsourcer, hopes to employ 750 people in Budapest by 2005. (June 1 2004 ed)

·         Economic growth in Hungary has been strong since 1989 and continues to be stable and very positive – notching up 3-4% annual growth rates from 2001 while traditional EU countries have struggled to manage 1%.  Industrial production is up almost 8% on a year ago (Economist – September 04) and plans are in place for Hungary to switch into the Euro currency by 2010.

·         The International Monetary Fund (IMF), wrote in their 2002 Financial Sector Assessment Programme report that: "Hungary, which is in the final stages of transition to a market economy, has one of the most developed financial systems in Central and Eastern Europe."

·         Tax on profits from selling a property is 16%* (There is tax on profits of 16% and on sales of 2%) which is far more attractive than UK capital gains tax. There are also legitimate ways to not pay any tax whatsoever on the sale of property.

·         At 18% the Hungarian government has set corporate tax at an aggressively low rate.

The price of a Studio or one bedroom apartment ranges from £45,000 to £180,000 GBP. Compared to major European cities, property in Budapest has plenty of room for growth for the medium to long term investor. 

 

At the higher end of the market there are the classical buildings in Buda and apartments with Danube view in Pest, especially District V.  Newly built and conversion of apartment blocks in District V VI and VII on the Pest side are ideally situated for the rental market.  New developments in District XVI situated among exclusive villas and enjoying green surroundings ought to be brought to the investors' attention since these properties are expected to attract the Hungarian tenant within the rental market.

 

 

Property in District III on the Buda side has over the last two years been in high demand as new apartment blocks with communal Gym, swimming pool and other facilities have come under development.

 

Purchasing property in Budapest has also become much simpler in the last few years.  Contracts are available in both Hungarian and English and the initial deposit of 5-10% is protected by Hungarian law in that for whatever reason the seller backs out of the contract he/she is obliged to pay twice the deposit.

 

Cost of purchase of around 8-10% include 6% stamp duty, although it is worth noting that there is presently no stamp duty on newly built apartments below the price of approximately £80,000 GBP.

 

Mortgages available to foreigners in Hungary have become more flexible.  Although these are set over a term of no more than 10 years at the moment, longer term loans are expected to be available in the very near future.  Meanwhile many investors are borrowing against the equity of their own homes here in the UK.

 

This information has been kindly supplied by Harlon Overseas Property (www.harlon.co.uk) who provides as excellent service for home owners and property investors both at home and abroad.

 

Call Harlon Overseas Property on 020 8942 9558 or email: property@harlon.co.uk for more information on purchase of property in Budapest.