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In the crosshairs: the concept of private property

napi.hu, 23.07.2018 – Pursuant to a government decree that entered into force last year with the exception of residential properties and lands of certain zoning categories the Hungarian state has a right of pre-emption over properties situated at world heritage sites. The enclosure to the decree contains the actual list of these properties complete with plot numbers, 80 147 units in all.

Exploiting the ambiguous wording of the decree the municipality of the 1st district of Budapest is registering its right of pre-emption over every non-residential property (garages, retail outlets etc.) although the world heritage significance of a garage or a retail outlet is highly questionable. Such a limitation may even act as a psychological obstacle to a sales transaction because nobody wants to buy an encumbered apartment. To make things worse, garages are usually sold together with the apartment they belong to, which means the right of pre-emption indirectly limits the owner’s free disposal of their apartment.

Warning signs on the apartment market

napi.hu, 23 July 2018 – Demand is still soaring on the market of new apartments but price hikes stole some of the impetus. According to the CEO of a major property agency there are still approximately 7-10 thousand apartments sold in Budapest annually but the average time needed to sell a property has increased as a result of the higher prices.

According to market experience HUF 30 million is a dividing line: more expensive properties take longer to sell.

The low VAT resulted in neither overdevelopment nor oversupply and apartments in the process of building sell within a year maximum.

Some analysts expect a small supply increase after 2020 and also a stronger demand for pre-owned apartments.

Huge price increases around Lake Balaton

napi.hu 29. June 2018 – At present, holiday properties in County Veszprém are the most expensive, while County Zala shows the steepest price hikes and County Somogy boasts the most construction projects on the shores of Lake Balaton. Prices increases are exceptionally high in all three counties because new developments have been rearranging the market. Residential property prices around the lake have also been increasing continually. Back in spring 2015 average prices were approximately HUF 223,000 while in the second quarter of 2018 they were around HUF 335,000.

Property developers have been turning their attention to the region in the past few months. This is one of the reasons why County Veszprém and Somogy left County Zala behind: the latter has only started to draw developers recently. Prices in Somogy and Veszprém were more or less in synch up until the second quarter of 2016, but in County Veszprém there was a big bang in the second half of 2016, owing to new residential and other development projects. By 2018 the difference diminished because some large scale development projects had started in County Somogy, too (most notably in Siófok, Zamárdi, Balatonlelle, Fonyód and Balatonszemes).

Government super weapon apparently missed its target

napi.hu 4 July 2018 – The end of the preferential 5 per cent VAT rate will put an abrupt end to the housing boom and result in a brutal price increase of newly-built apartments. The almost 25 per cent price hike will have a serious effect on instalments paid for new apartments, new construction projects and on new developments after 2020, said to portfolio.hu based on a radio interview with Mihály Varga finance minister.

Varga reminded that the term of the Preferential VAT Act runs between 2016 and 2019 and that the government decided to forego significant tax income to further its demographic goals. However, 10 per cent of new apartments are bought by foreigners in Budapest, which means the benefit is exploited by real estate investors which is not what the government was aiming to achieve.