COUNTRY PROFILE

When compared with some Eastern European markets, Hungary is remarkably untouched, with most attention focused on the capital, Budapest, and with increasing interest around Lake Balaton in the country’s southwest.

Why buy in Hungary?

Another beneficiary of EU membership, since May 2004 the country has blossomed economically, entering the 21st century successfully with a GDP growth rate of 4.1% for 2005, and The Economist predicting a 4.2% growth rate for 2007. The recent political and economic turmoil, which culminated in riots in the capital back in September 2006, doesn’t seem to have damaged the rapidly expanding foreign investment market, although buyers have tended to be more watchful.

Hungary has one of the highest foreign direct investment levels in Eastern Europe and tourism is a massive industry, with nearly 14 million people visiting the country annually, and the holiday market having the distinct advantage of being year-round. Interest is being further bolstered by the increasing regularity of budget flights serving Budapest, with Ryanair also offering flights into Lake Balaton. With a legal system and land registry which is straightforward, well organised and efficiently run, foreigners can also be assured that they will enjoy a relatively trouble free purchase.

Hungary has one of Europe’s strongest folk traditions, producing excellent examples of embroidery, pottery and wall paintings, and with a rich musical heritage, especially of Gypsy and folk songs. Despite the fact that 63% of the population lives in urban areas, the Hungarians have strong ties with the land and more than 50% of the population still indulge in part-time farming–in some rural areas, it seems as if time has stood still.

A stunningly beautiful country, the geography of Hungary is lush and varied, with two-thirds being covered by flatlands, juxtaposed with the verdant forests to the north. Of the hundreds of thousands of plains, the vast Great Plain in the southeast is undoubtedly the most famous, and the largest, covering 52,000 square kilometres. Hungary is dissected by the Danube, and one of the river’s most picturesque stretches–the Danube Bend–is situated just outside of Budapest. This capital city is arguably one of Europe’s finest and most cultured. Home to hundreds of restaurants, cafés and bars and numerous museums, the opera house, art galleries, and a zoo with some fine art nouveau animal houses, it is unsurprising that so many westerners are choosing to buy here.

Eighty kilometres southwest of the capital is Lake Balaton, one of Europe’s largest lakes, covering a surface area of 592 square kilometres, and now one of Hungary’s most popular second home destinations.

With 11 national parks and a number of UNESCO World Heritage sites, such as the ancient village of Hollókõ, Hungary also boasts plenty of wildlife, from the more common European species to endangered animals such as wild cats and lake bats, and an extraordinary array of waterfowl. There are also numerous castles and fortresses to visit, while you can choose from over 130 Turkish baths. With more than 1,000 thermal springs scattered throughout Hungary, the country has a strong spa culture.

With a rich history, some fine wines – the vinification industry has undergone something of a Renaissance in the past 15 years – and hearty foods, Hungary is an enticing country, not least of all because its people are incredibly welcoming and friendly. As one of the post-communist bloc’s most forward-thinking countries, there is a bright future ahead.

Politics and the economy

Economic chaos?

The Hungarian economy has always suffered as the government has attempted to reconcile the demands of its electorate with the rigorous constraints of running a market economy. Post communist years saw the standard of living drop for many, and the gap between the rich and poor grow increasingly wide. However, even though wages have risen to an average of £399 a month, this comes at a cost, requiring the government to spend over half its budget every year on social security. This is an unsustainable amount and with a budget deficit of roughly 10.1% of annual GDP, (compared with 3.2% in the Czech Republic), this is more than three times the limit set for members of the euro. Consequently, question marks have been raised over the sustainability of investments in Hungary, especially after the violent riots of September 2006 which followed the admission by Prime Minister Ferenc Gyurcsany that his government had lied in order to win the last election. However, the riots were small scale and supported by the minority rather than the majority of Hungarian citizens. Nevertheless, there is evident discontent over the government’s economic policy and following last year’s trouble, the government is focusing its efforts on economic reforms and capping spending.

Generally speaking, Hungary has made the transition to a market economy comfortably, with a per capita income nearly two-thirds that of the EU-25 average. The country continues to demonstrate strong, stable economic development, despite 1995 and 2001 experiencing sluggish growth followed by a sharp decline in the level of house construction. Nevertheless, there are many reasons to be optimistic. Between 1996 and 2003, inflation fell from 30% to 6% and despite expected rises of up to 7–8% in 2007, from 3.7% in 2006, predictions suggest inflation will settle at 6% by the end of the year, with the best case scenario seeing falls of 3–4% by the end of 2008.

The private sector accounts for over 80–90% of GDP, with cumulative foreign direct investment totalling more than $60 billion since 1989. Currently, Tescos and Vodafone both have a presence in Hungary, with 90% of telecommunications and 66% of the manufacturing industry controlled by foreign companies. Exports have continued to grow since the 90s and today, 75% of the country’s trade is carried out with the EU. Unemployment has persisted above 6% but wage rates are now on a par with western levels. All this translates into a healthy investment environment and while the 90s saw many problems, thanks to high levels of investment from America, Europe and Asia, Hungary is making progress, albeit at a slower rate than Poland and the Czech Republic.

Hungary is aiming to adopt the euro by 2010 although this date is seen as highly unrealistic given the current shape of the economy in relation to the Maastricht criteria. A date of 2013–2014 is more realistic and some believe that Romania and Bulgaria might beat Hungary to euro adoption.

Hungary is a parliamentary democracy and has been since the collapse of communism in 1989, when it became the Republic of Hungary. The current President, László Sólyom, was elected by parliament in June 2005. The Prime Minister is Ferenc Gyurcsány, who was elected in 2004.

Geography and climate

Although a landlocked country, Hungary is no less attractive as a result of the lack of coastline. Bordered by several countries – Montenegro, Croatia, Austria, Slovakia, Slovenia and Romania – Hungary is centrally positioned in Europe, lying in the flat Carpathian Basin. This beautiful country boasts vast tracts of flat plains, along with the rolling hills of the Transdanubia region, and the Mecsek, Villány and Carpathian Mountains. As well as the Danube, Hungary is also home to the Tisza and Dráva rivers, as well as Lake Balaton. Hungary also boasts the largest thermal lake in the world, Lake Hévíz (Hévíz Spa).

The Hungarian climate is continental and temperate, with July and August offering the warmest temperatures. Protected by the Alps in the west and the Carpathians to the north, east and southeast, the winters are not as severe as you might expect, although snowfall can be heavy. Spring and early summer are the wettest time of year with many thunderstorms, while winters are cold, with snow lying for between 30 and 40 days on average – longer during more extreme winters, when the Danube often freezes. The average monthly temperature varies from 27 to 35°C in summer and 0 to –15°C in winter. The average annual rainfall is approximately 600mm.

History and culture

Because of her position in the heart of Europe, Hungary witnessed many invasions and rulers. The original settlers of the country were the Magyars, and today Hungarians still cling tightly to their Magyar roots, referring to themselves as Magyars and speaking magyar nyelv – Hungarian. The Magyars originated in central Asia but invaded Hungary, founding the Country of the Magyars (Magyarország) in AD896. The Hungarian state was officially founded in AD1000 when Hungary’s first king, King Stephen, was crowned.

In the 14th and 15th centuries, Hungary was a powerful kingdom and ruled much of Romania, Ukraine, Slovakia and Croatia, but in the 16th century, the Turks advanced and occupied the country. Ottoman rule lasted until the mid-17th century, when it was the turn of the Hapsburgs, whose rule continued until the collapse of the Austro-Hungarian Empire after WWI. While the end of the war saw Hungary become an independent republic, being on the losing side meant she lost much of her territory. On the side of Nazi Germany in WWII, Hungary was eventually occupied by her allies until 1945, when the Russians liberated it. What followed was communist rule, which lasted from 1947 to 1988. In the late 1980s, it was Hungary that led the movement to dissolve the Warsaw Pact, moving away from communism and towards democratic rule and a market economy, culminating in a declaration by Mátyás Szũrös on October 23rd 1989, of the Third Hungarian Republic. Hungary’s first free elections were held in 1990.

Culturally, Hungary is awash with traditional arts, such as ballet, opera, symphonies and writing, as well as folk and gypsy music. The most famous of Hungary’s composers is Franz Liszt (1811–1886), a world-renowned pianist and composer of the Romantic period. Hungarians are also justly proud of their many inventions, which include the noiseless match (János Irínyi), Rubik’s cube (Ernõ Rubik), the krypton electric bulb (Imre Bródy, 1891–1944), the ballpoint pen (invented by László József Bíró) and the theory of the hydrogen bomb. Zsa Zsa Gabor and Harry Houdini also rank among famous Hungarians.

Religion

The Hungarian people are predominantly Catholic, with two-thirds–68% – practising Roman Catholics. Of the remaining population, 20% are Calvinist and 5% Lutheran, with a small minority of Jews among the remaining 7%.

Tourism and getting there

The tourist industry in Hungary is focused around Budapest, which is also the beating heart of the country’s economy. Tourism doesn’t play as big an economic role as in many other EU countries, but it is a growing industry, ranked as the 15th largest tourist destination worldwide, ahead of Portugal and Greece. Tourism generated an income of $10 million in 2006 and with GDP generated from tourism set to increase by 4.7% between 2007 and 2016 the healthy outlook spells good news for investors.

More importantly, the tourist industry is attracting many westerners who have a greater disposable income and are investing more into the country during their visits. With over 10 million visitors to the country in 2005, income from tourism represents 4.7% of the country’s GDP, and Hungary is currently placed 40th of 124 countries in the World Economic Forum’s Tourism Competitiveness survey.

Tourist hotspots include Lake Balaton, which is visited by more than one million people each year. However, most choose to visit or stay around Budapest. That said, significant income from short-term rentals should not be overestimated in the capital, as most rental demand in Budapest comes in the form of long-term lets.

Finally, budget flights have helped stimulate the tourist growth and today Hungary has one of the most established tourist markets in Eastern Europe, primarily based around Budapest. Currently, Air Berlin, easyJet, Wizz Air and Jet2 all fly to Budapest and, thanks to budget flights, 2004 saw Ferihegy airport become the third busiest airport in Central Europe after Vienna and Prague, with 6.5 million passengers registered, up 28% from 2003. After only one and a half years of operation, the budget airlines flying to Budapest accounted for over 15% of the total market share at Ferihegy airport and this improved accessibility of Hungary has undoubtedly contributed to the growing number of visitors.

The cost of living

The cost of living in Hungary is not as low as it once was, but it is still lower than the UK, with a three-course meal and wine setting you back by an average of £20, while a family of four can feed themselves on between £20 and £40 a week, depending on their eating habits.

Budapest is obviously the most expensive place to live in the country, and areas of Lake Balaton can also be quite costly. According to the Mercer Cost of Living Survey for 2006, Budapest is the 65th most expensive city to live in, dropping from 24th place in 2005.

Food and drink

Cuisine is just as much a part of the cultural experience in Hungary as visiting the Vár (Buda Castle) on the Buda side of the Danube, and Hungarian food has always been hearty, with an interesting blend of influences from both the Magyar settlers and western neighbours. Traditional dishes include goulash, which is flavoured with paprika and includes potatoes and any meat currently to hand. Meat features heavily on any menu, as does fish stew, stuffed peppers and paprika chicken. Sour cream and cheese are commonly included in dishes, with sauerkraut and dumplings introduced by the various Austrian and Turkish invaders, along with sweet pastries.

Today Budapest is a foodie’s dream, with restaurants serving everything from Italian, French and Greek to Japanese, Thai, Chinese and Indian cuisine. Prices can be steep and in some cases on a par with London restaurants, but if you look off the beaten track, it’s possible to pay more reasonable and local prices. If you fancy trying some of the local cuisine, there are also a number of places to look – some of which even serve pike!

As for beverages, there are some fantastic local wines to sample and you can buy a decent bottle of Hungarian red for as little as £2, with some excellent white and sparkling varieties on offer too.