The vast majority of property in Hungary is privately owned and there is a wide range of different types of freehold property available. For many years, the property market had been flourishing in Hungary and prices continued to rise.
Construction is also booming. There is particularly high demand for property in Budapest. Another area attracting a lot of interest is Balaton and the surrounding area (a popular holiday resort for both foreigners and Hungarians).
Over the last few years, apartments in traditional buildings from the early 1900s in Budapest have been appreciating at 20-35% per annum. Compared to other European cities properties in Budapest are a similar price.
Due to economic recession, however, prices came under severe pressure since 2009. It is yet to be seen if and when the Hungarian property will recover and whether it it will get back to its previous growth path.
Why invest in property in Hungary?
Why has Hungary, and especially Budapest, been attracting foreign investment in construction and property?:
- High economic growth rates over the last several years: between 2000 and 2005 the average rate was 4.3%. Over the same period, average economic growth rate for the EU 15 was 1.6%. However, in recent year economic growth has significantly decreased and it is yet to be seen if Hungary can overcome the recent recession.
- Low taxes: corporate income tax is 18%, industrial tax 2%.
Some investments as well as rentals are being denominated wholly or partly in Euros. This means that exposure to currency fluctuation, for Euro-area investors, is non-existent or minimal.
Of course, the Hungarian property market is not risk-free (there is arguably no such thing as completely safe investment!) The economic slump is appreciable in Hungary too.
Also, investors in unlisted property companies should be aware that there is no open, liquid market for the trade of shares. This means that liquidating investments can be difficult and the value of shares in the market may be limited by the availability of willing buyers. Investors therefore bear the risk of having to accept a considerable markdown when selling their interest.