The Lettings Market: Hungary
Author Leaonne Hall is an expert on the overseas property market and has written extensively for a number of newsstand titles. She previously produced three editions of the Red Guide to Buying Property in Eastern Europe, and has been writing in detail on the individual markets since 2003.
THE LETTINGS MARKET
The lettings market shouldn’t be relied upon to cover your expenses in Hungary. As most Hungarians tend to own their own home, demand isn’t massive for local rentals, and given that the Hungarian workforce is highly trained and educated, there is less expat demand than you might expect. However, as in many other popular locations, you can now also purchase property with a guaranteed rental income.
The market in Budapest is decidedly residential, with rents geared towards long-term lettings from foreign employees, students and Hungarian business people. The centrally located districts – V, VI, VII, VIII, IX, and XIII on the Pest side, and I, II, III, XI, and XII on the Buda side–offer the best returns and are the most popular with tenants. In contrast, Lake Balaton is a short-term holiday lets market with a rental season that runs from May to September.
In both instances, rental yields of between 6% and 8% are available, but be aware that you are looking at costs of 10% in management fees and a 20% tax on any income generated. You will be required to register with the National Tax office (see www.apeh.hu) and secure a tax ID. More realistic is a figure of 4–5% yield once you have paid any additional costs.
Thanks to neglect during the communist era, many of Budapest’s 19th-century art deco and baroque buildings have fallen into disrepair, and consequently, for those looking to buy a renovation project, there are many options open to you. Rather than being faced with the traditional western concept of buying a wreck and transforming it into your dream home, in Hungary’s capital you are more likely to find a property that requires some modernisation and a face lift, rather than a complete overhaul.
Generally speaking, it is recommended that foreign buyers shy away from undertaking major structural work on some of Budapest’s classical buildings, as renovations are fraught with complications and difficulties, and more importantly, huge costs. Thanks to the abundance of traditional architectural features – which make property attractive to rent or resell–the cost of renovation works can be as high as the original value paid for the property. No special permission is needed in order to carry out renovation work and prices can vary from £30 per square metre for a basic renovation to £250 for something more lavish.
Be aware that undertaking a renovation will generally require you to replace lead pipes with a new system, overhaul the wiring and electrical system, and introduce a heating system to the property as many are often communal and this means that it is not possible to control the temperature independently.
In order to undertake a renovation project, you should always:
- get more than one quote for the work you intend to undertake;
- get a thorough survey done and an estimate of the kind of work you’ll be required to undertake, as well as the potential cost;
- appoint an architect to prepare the plans and a project manager/company to oversee the work if you don’t intend to be in the country full time.