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Apartment market: price hike stalled?, 30 April 2019 – Although the annual rate of increase of apartment prices has fallen, there is still a significant hike exceeding 20 per cent in Budapest, according to the latest survey published by the National Bank of Hungary.

In Budapest, the Q4 2018 the annual acceleration rate of prices was slightly slower but still strong at 22.9 per cent. The latest apartment price index shows a slower nominal annual rate of increase of 18.2 per cent for country towns, which exceeds the figure for the previous quarter.

In small settlements, the nominal price hike was 2.3 per cent, 13 percentage points less than the national average, which indicates a further increase of the difference between smaller and larger settlements.

That said, according to the summary report published by the National Bank of Hungary, the nominal price increase was only 0.2 per cent on average in the fourth quarter of 2018, while the annual rate of increase was 15.2 per cent, compared to 16.2 per cent in the previous quarter. The national average of apartment price increase was 11.6 per cent. In Q4 2018 the national average of real price increase was 11.6 per cent.

Skyrocketing apartment prices, 29 January 2019 – As a result of last years’ price increases we need to work years more for an apartment, assuming we save up our entire salary. According to the calculations of a large real estate agency the price of an average apartment in a high-rise concrete block equals 8.5 years’ salary, while an apartment in a brick and mortar building costs the equivalent of 14 years’ salary. The exact figures depend on the job of the buyer, but an average concrete and a brick and mortar apartment cost 103 and 169 months’ average salary, respectively – assuming the buyer is not taking out a loan to finance the purchase.

Employees of the financial sector are in the best position here: their high average salaries enable them to acquire an apartment for 4.5 and 7.5 years’ entire wages, respectively. Naturally, their situation has also deteriorated compared to 2014. Employees in the catering industry are facing the biggest difficulties, but those in health care don’t have it easy either. They need to work 13 years for an apartment in a high-rise and 21-22 years in a traditional building. For catering and health care employees the same figures in 2014 were 8 and 14 years, respectively.

Is it worth moving to the suburbs?, 31. January 2019 – A recent study showed that for the price of an apartment in an old-school condominium apartment or in a popular housing estate you can easily buy a detached house in the suburbs. Apart from the price the lush, green environment and the lower coverage of built-up areas have a strong appeal.

According to another study the unpleasant side-effects of commuting to and from work pose an unexpected burden on those moving to the suburbs. The results showed that people tend to overestimate the positive effects of the suburbs and underestimate the negative impact of commuting, which are probably very difficult to get used to. A German study even expressed these burdens in monetary figures: their calculation shows that 23 minutes of commuter traffic can only be compensated by a 19 per cent higher salary. Overall, they found that commuting is evidently a serious mental and physical difficulty and also a key source of stress for people.

Which is the most expensive country town?, 27 December 2018 – In 2018 apartments in high-rise concrete blocks in Buda and in the Budapest conurbation sold fastest, within six weeks on average. Turnover increased by 13 per cent in the Budapest conurbation. Owners of apartments in high-rise concrete blocks in small towns had to wait for a buyer the longest, three months on average. Pre-owned apartments in Central Budapest sold for an average price of HUF 900 thousand per square metre, an increase of 11 per cent compared to 2017. The record holder among the Buda districts was District 1, with an average price exceeding HUF 700 thousand per square metre. In the country, the town with the biggest price increase was Debrecen: average prices per square metre increased by more than 25 per cent. The title of the most expensive country town in Hungary went to Sopron, where a pre-owned condominium apartment fetched a price of HUF 375 thousand per square metre.

This is how property sales are taxed, 18. November 2018 – Property sales are subject to personal income tax, unless you bought that property before 2013. Sales tax is payable if the property is sold at a higher price than it was bought. If the seller of the property or of an intangible asset (e.g. a usufruct) is a private person, then the earnings is subject to a 15 per cent personal income tax. The earnings equals the difference of the revenue and the deductible expenses. In the extreme fall where the expenses exceed the sales price, no tax shall be paid.

The following items qualify as revenue: the sales price, the market value of any items received in return for the property and the late payment interest paid by the buyer.

The following expenses can used to reduce the tax base: the price originally paid for the property, public dues paid in connection with the purchase, certain invoiced developments effected since the purchase that increase the value or conserve the physical repair of the property (e.g. the replacement of doors and windows, a heating system upgrade etc.), legal and consulting fees and the expenses related to the sale.

Hungarians take out ever increasing loans, 1 October 2018 – Banks do not mess around when approving loan applications: clients are notified about the result within three weeks. Despite an ever growing demand there is no congestion in the approval procedure: banks pass their decisions within no more than 15 working days. The processing time of standard mortgage applications submitted to UniCredit Bank is 9 working days, while “client friendly residential loans” are processed within 7-8 days.

Processing is completed within five working days at K&H Bank, provided that a full set of documentation is available. According to CIB Bank processing times have become shorter since the introduction of “qualified client friendly residential loans”.

Almost all banks reported an increase of the volume of loans compared to the same period last year. In 2018 the average loan applied for by clients of UniCredit Bank exceeded HUF 13 million, which is an almost 20 per cent increase from last year. The average loan at K&H Bank is almost HUF 10 million, compared to HUF 9 million last year.

Only a few are granted social housing in Budapest, 29. September 2018 – According to data collected by an NGO only 5 per cent of all residential properties in Budapest are owned by one of the local governments or by the Metropolitan Local Government of Budapest. The national average is around 2 per cent while back in 1989, at the time of the change of the political system, 50 per cent of all apartments were owned by the municipalities. The percentage of residential apartments owned by the district local government is the highest in Districts 1, 8, 9, and 13. The largest number of apartments owned by the local government are in Districts 3, 8, 9, and 13.

There are at least 2500 vacant social housing apartments in Budapest. The majority have a bathroom and a lavatory, some have a bathroom only (without a lavatory), or neither a bathroom nor a lavatory, while some are termed as “emergency housing” suitable for temporary purposes only. According to the information supplied by the local governments at least 20 per cent of these apartments are in a habitable condition, i.e. there are at least 500 vacant social housing apartments.

Last year at least 346 apartments were sold by district local governments in Budapest and only as few as 31 were purchased or built. In contrast, at least 6700 families applied for social housing to one of the district local governments of the Hungarian capital.

The most popular apartment types in Hungary, 28. September 2018 – The residential property boom continues in Hungary. In the second half of the year demand was even higher than in the first, especially for apartments with their own boiler heating. On a year-on-year basis, demand for each apartment advertised grew by 12, 15 and 24 per cent in June, July and August, respectively, followed by a whopping 41 per cent increase in September. This spectacular figure can partly be explained by the fact that on account of expected tightening of credit terms on residential properties and of the potential increase of the preferential VAT on apartments after the end of 2019 many buyers are keen to fast-track their purchase.
As far as heating fuels are concerned, natural gas is the most popular. The popularity of apartments with their own boiler heating is above average: 32 per cent of potential buyers prefer this type of heating because it is generally believed to be the most economical. Gas-fuelled wall heaters are also popular because they form the most frequent type of heating in studio apartments. The high proportion of district heating is a direct consequence of the popularity of precast concrete high rise apartment blocks.

Property market: downturn already at 60 per cent in Hungary, 17. August 2018 – Property investment transactions worth approximately EUR 320 million were closed in Hungary by the middle of the year, a 60 per cent reduction from the same period of the previous year. At the same time the favourable financing environment and sufficient liquidity may keep demand steady in the market of investment purpose properties. The annual investment value in 2018 may be close to previous year’s EUR 1.75 billion but closure of some high-value transactions may be delayed until 2019. Demand for retail outlets has grown significantly in the first half of 2018. The reduction of return on invested capital stopped in the first six months of 2018, the only exception being the premium retail sector. ROI in office and industrial/logistics properties is 6 and 7.7 per cent, respectively. ROI for retail outlets has sunk to 5.8 per cent. Analysts predict a slight reduction of returns. As far as sectoral distribution is concerned, a further increase of the share of retail outlets is expected and – on account of the Category ‘A’ office premises completed – the number of transactions in the office sector is also likely to increase.

Shocking housing info about 1.3 million Hungarian families, 5 August 2018 – On average, every third Hungarian families are facing difficulties in paying their housing expenses on account of the lost balance between their income and their housing expenses. Apart from income, the ability to pay for housing is strongly determined by schooling and the type of residence. If a family needs to spend too much (more than 35-40 per cent) of their income on housing then they are facing an affordability problem. According to latest surveys 32 per cent (1.3 million households) are affected. This means that they do not have enough money left for maintaining an acceptable standard of living.

Unsurprisingly, affordably is primarily affected by the inequalities of the income status of Hungarian families. Among the poorest 40 per cent of families almost 60 per cent are facing difficulties in paying their housing expenses. Among the richest 30 per cent this ratio is only 10 per cent.

Budapest residential property market may slow down, 30 July 2018 – In the first half of 2018 there were 6517 apartments built in Hungary, 30 per cent more than in the same period of the previous year. The number of residential units under planning was 18,066, 8.9 per cent less than in the first half of 2017. The number of planning approvals issued in Budapest decreased by 27 per cent. 50-50 per cent of residential properties are still built by private persons and companies, respectively.

54 per cent of apartments created in a new building are located in houses, 36 per cent in condominiums and 6.2 per cent in gated residential communities.

The average floor space of apartments is 101 square metres, an increase of 5 square metres from the previous year. The number of apartments planned reduced by 27 and 3.5 per cent in Budapest and in county centres, respectively, and increased (by 17 per cent) in other towns and cities only.

In the crosshairs: the concept of private property, 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, 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 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 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 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.

How long can the rally last? 15 January 2017 – Hungarian construction industry output is growing fast. According to market analysts, however, the number of restrictive factors is growing, too. A poor 2016 performance meant a very low base which supported a spectacular relative increase in 2017. Development projects financed by the EU and residential construction drive the industry forward. Growth is set to continue in the next few months: the volume of orders in November was 110 per cent higher than a year before. That said, a lack of workforce and the resulting increase of expenses pose significant problems for construction companies. Also, the future of the discounted VAT rate levied on residential projects is still not clear and if the reduced rate is cancelled the willingness to start new projects may decrease.

Changes in the legislation of apartment purchase duties, 12.12.2017 – From 1 January 2018 there will be changes in the method of calculation of duties payable on apartment purchases. When calculating the “reduced” duty base, i.e. the value upon which the duty is payable or when applying duty exemption, the market value of an apartment sold within three years of the purchase can be considered, as opposed to one year allowed earlier. “Reduced duty” means that the buyer can deduct from the duty base created by the purchase of an apartment the market value of an apartment sold by the same buyer, i.e. the duty base will be the difference between the market value of the sold and the purchased apartments. As far as the market value of an apartment sold after the purchase is concerned the rules remain unchanged: it can only be reduced if the sale occurred within one year of the purchase transaction.

How long will Hungarian apartment prices rise?, 08.11.2017 – There was a 2-point adjustment to the Budapest property index published by GKI Economic Research Ltd. compared to the previous figure from July. The national index remained unchanged. Property market outlooks peaked about a year ago but expectations are still high.

Although in the first ten months of 2017 the turnover of the apartment market did not grow on a year-on-year basis (in fact, there was a slight decrease), apartments at popular locations are still selling like hot potatoes and prices are still on the increase. An apartment with a good location is still considered to be a lucrative investment because at the age of low deposit interest rates it is hard to find a financial instrument that offers sensible returns paired with low risk.

As far as the Budapest agglomeration and Western Hungary are concerned the expectations of property agents for the next 12 months have deteriorated slightly compared to the previous quarter. In the Eastern part of the country, however, a slight improvement was detected.

This is not the time to buy a holiday home, 28.10.2017 – While there is no point in postponing apartment purchases because prices are climbing higher and higher, it makes sense to wait with buying a holiday home. According to a report published by a large online property agency this is because similarly to previous years prices are likely to start falling after the autumn rally. Let us take 2016 as an example: in the first and second quarters holiday homes sold at an average price of HUF 14 million compared to the average price of HUF 19 million at the end of summer 2015. The most expensive regions for buying a holiday home are almost exclusively in the proximity of Lake Balaton. The most expensive one is Siófok, where a holiday home will cost HUF 29 million, while a similar property in the region of Keszthely can be had for HUF 10 million less.

New apartments may flood the market, 04.11.2017 – A leading real estate expert said as a result of the 5 per cent preferential VAT rate that is expected to expire in 2019 the number of newly built apartments will become available on the market in the next couple of years will exceed even today’s figures.

There is an apartment construction boom in Hungary which, apart from the reduced VAT rate, is also due to CSOK, the Family Home Allowance. On a year-on-year basis the number of new apartments completed grew by 50 per cent in the first three quarters of 2017. The average price per square metre in Budapest, the Western and Eastern regions of Hungary is approximately 650-700k HUF, 360-400k HUF and 350-380k HUF, respectively. The differences are even greater for pre-owned apartments: these properties are three times more expensive in Budapest than in other parts of the country.