THE PROPERTY MARKET

When you consider that Hungary has one of the wealthiest and most stable economies in Eastern Europe, and one of the east’s most mature and well-developed property markets, it’s staggering to think that you can still purchase a newly-built luxury flat for as little as £28,000.

Since Hungary abandoned communism and began to look west, canny investors have benefited from unprecedented property price rises, with the Hungarian Central Statistical Office reporting increases of 63% across the country between 1999–2003. During the same period, property in Budapest alone appreciated by 60%, with the capital the focal point for foreign buyers. Recently, these unprecedented price hikes have slowed, with the years between 2003–05 reporting respectable growth rates of between 15–20%, and rental income continuing to boast a minimum yield of 6%, peaking at around 15%. Consequently, buyers mustn’t think they’ve missed out, as the current combination of good rental yields and high capital appreciation makes the market the perfect environment for investment. Prices are expected to continue growing at an average of 10% until 2010, and as soon as Hungary adopts the euro, the market is expected to see an upturn in value.

However, the GKI Economic Research Company (www.gki.hu) have reported no real growth in the residential market between January 2006 and January 2007, with 63% of estate agents reporting oversupply in 2007, compared with 81% at the end of 2006. GKI believe that the market will continue to decline in 2007 before seeing any growth, although January 2007 has seen national price growth of 4.5%. While this may seem like a pessimistic picture, it seems that the relationship between supply and demand has yet to settle. Since 1995, the number of dwellings constructed has almost doubled from 24,718 to 41,084 in 2005, with the number of construction permits issued leaping from 39,053 to 51,490. However, while oversupply may currently be an issue, affordability isn’t and you can certainly get more for your money than you can in the UK. Experts also agree that the sustainability of the market has been largely guaranteed by local demand, and thanks to government housing subsidies Hungary has one of the highest levels of home ownership in Europe at 95%. Also, increasing numbers of citizens are applying for mortgages, making for a healthy resale market.

Where to buy

Budapest

The charismatic and enchanting capital city of Budapest is country’s economic and tourist hub. Housing one-fifth of the country’s population and accounting for 60% of Hungary’s commercial activity, it is no surprise that the majority of foreign direct investment is poured into the capital, meaning more expats and a high demand for Western-standard, long-term rental properties.

A lucrative place to invest, Budapest is currently experiencing price hikes of 15% per annum, and given the accessibility of the capital via budget flights and the fact that you can drive to any corner of Hungary from Budapest within two hours, it’s central location makes it a popular choice.

Despite recent rises in property prices, Budapest is still an average of 30% cheaper than many other European cities and given that prices for newly-built apartments range from under £30,000 up to £500,000, there is something for every budget. Certain areas of the city can offer a capital gain of up to 40%, although this is becoming increasingly rare as the market has calmed over the last two to three years.

Apartments tend to be the most popular and also the safest investments in the city. The best location is central Budapest, close to all amenities, transport and attractions. Districts V, VI, VII, VIII and IX are extremely desirable, with districts VIII and IX offering cheaper prices and being the most up-and-coming areas of the city. The greater price appreciation tends to be taking place on the Pest side of the Danube, with Buda appealing to the buyer with the bigger budget, being more expensive.

Traditional properties tend to be decorative 19th-century buildings, which are often divided into flats. These tend to offer a range of architectural features, ranging from art deco to baroque or rococo in design, and these can be found in most of the central districts. Increasingly, there is also a trend for newly-built developments situated on the Danube.

Lake Balaton

Experiencing price increases of around 20% per annum, Lake Balaton is Hungary’s hottest property market outside of Budapest. It has long been a popular holiday destination with central Europeans and locals who yearn for some R&R, offering excellent watersports facilities and outdoor activities. It has also been popular with German second-home buyers for a number of years.

A major wine region and number-one holiday destination in Hungary, lying 96 kilometres to the southwest of Budapest, Lake Balaton is becoming an increasingly popular destination. It doesn’t offer the same security as the Budapest market, but there is still money to be made from holiday rentals, and thanks to regular Ryanair flights, it is becoming more established, with prices rapidly rising. The average property is selling for around £34,000, although if you buy on the waterfront, you are looking at closer to £136,000. The northern shore of the 50-mile-long lake represents the better investment long term, although it is also the most expensive area, with the southern shore providing the cheaper housing, but also being more brash and prone to nightclubs and 70s-style hotels.

For bargain prices you need to look away from the lakeside and further inland, where you can pick up a small villa for around £34,000. Currently, the choice of property is plentiful and typically you will find spacious villas and country houses. However, supply won’t last forever, although new builds are springing up around the lake. Nevertheless, you will get much more for your money than for the equivalent price in Budapest.

Be aware that parts of the lake are declared national park and therefore not open to purchase by foreign buyers.

What to buy

The residential property market in Hungary generally consists of freehold properties and typically you are looking at either resale or newly-built homes.

Resales are readily available in the Budapest market, with characterful 19th-century buildings dominating sales. Most buildings in central Budapest date from the 19th century. Unfortunately, during the communist period, there was almost no investment in their upkeep and so the quality of apartment buildings varies widely. Consequently, they tend to be sold renovated and spilt into apartments, with period architecture and traditional features such as balconies and frescoes adorning many. Offering all mod cons and plush interiors, these are not only the most in demand property but also the best in terms of rental yields, as they tend to be centrally located. However, in Budapest, space issues mean properties aren’t always the largest–in fact, living space has dropped from an average of 99 square metres in 1995 to 87 square metres in 2005.

As for newly-built properties, the majority are sold off-plan and most developments sell out before construction has even begun, with the quality varying depending on the target market.

On Lake Balaton, you will find properties have more bedrooms and living space and are also grander–country houses and villas are the norm. For £64,000, you can pick up a three-bedroomed modern home only 1,000 metres from the lakeshore.