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How long can the rally last?
napi.hu 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
napi.hu, 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?
napi.hu, 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
napi.hu, 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
napi.hu, 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.
Fun facts on Hungarian residential properties
napi.hu, 06.06.2017 – According to a recent survey almost one third of occupied apartments in Hungary were built from brick and mortar, the percentage of apartments in concrete high-rises is 14 per cent while those built from adobe have a share of 13 per cent. In Budapest every fourth apartment is in a concrete high-rise. On a national level, one third of occupied apartments have three rooms while 31 and 29 per cent have two and four or more rooms, respectively. Average floor space has increased by 6 per cent since 2011 and is currently 84 sq. m. In Budapest the percentage of apartments with 40 or less sq. m. is 15 per cent, three times the national average.
In 2016 there were 2.49 people living each apartment. Occupant density is the lowest in Budapest with 2.15 people per apartment and the highest in small settlements (2.75 people per apartment). Last year more than 12 per cent of the 4.4 million apartments registered were vacant, and the tendency is rising. The number of unoccupied apartments grew as a result of the diminishing population, the aging population of small settlements, migration from villages and also the growing tendency of using apartments in towns as offices.
Strong start to the holiday home buying season at Lake Balaton
napi.hu, 25.05.2017. – According to a large property agency approximately 600 properties changed their owners around Lake Balaton in the first four months of the year. The majority of buyers are still Hungarians and prices in the most popular areas equal those in Budapest. In places with more difficult access from the capital – especially by public transport –, e.g. in Badacsonytördemic, Badacsonytomaj and Balatonberény, prices average at HUF 100-150,000. In Balatonfüred, on the other hand, apartments cost HUF 575,000 per square metre and those in Tihany fetch about HUF 700,000 while those directly at the lakeshore are even more expensive at HUF 1,000,000 per square metre. Along the Southern shore of the lake there is still a growing interest for holiday properties or even building plots situated closer to the lake. Properties farther from the water are, predictably, less sought after, especially if they are multi-story houses with 200 square metres or more, mainly from the “Zimmer Frei” period some twenty or more years ago.
Changes in the taxation of apartment letting
napi.hu, 09.05.2017 – According to a new analysis published by one of the largest property trading websites of Hungary next year’s tax legislation will rearrange the HUF 110-130 billion apartment rental market. Rental prices in Budapest are not expected to grow anymore, but in other towns there is still room for expansion, especially on the demand side. This is not expected to cause any rise in prices because next year’s revised tax legislation will basically halve current taxes and duties levied on apartment letting revenues.
According to plans the 14 per cent health care contribution would be abolished on revenues exceeding HUF 1 million per year. Revenues will only be subject to 15 per cent personal income tax, which may mean that the current average rental fee of HUF 130-135 thousand will not increase – not least because clients cannot afford to pay more. The average rental fee already equals two thirds of the average salary in Hungary.
This is how crime rate affects apartment prices
In theory, there is a strong correlation between the crime rate and the property prices of a neighbourhood: security has a well-defined market value. However, in reality this relationship is not that straightforward: “As ever so often, the devil is in the details”, a property market analyst said. 60-70 per cent of the price of an apartment depends on the property’s physical parameters and the rest comes from the quality of the neighbourhood and the quantity and quality of services available locally. Crime and security have a strong influence, but we must also consider what type of crimes the statistics mention.
For example, although according to data published at www.police.hu the crime rate per 1000 inhabitants is the highest in downtown Budapest, apartments here are still some of the most expensive ones in the Hungarian capital: the average offering price of HUF 515 thousand in 2014 increased to HUF 862 thousand by 2016. The districts most severely hit by burglaries are the central ones in Buda (with the exception of District I.), and although the number of reported cases sank by 30-50 per cent in all of them, burglaries are still very frequent compared to the number of inhabitants.
Apartment buyers deterred by prices
napi.hu, 06.04.2017 – According to the transaction volume estimate of a large Hungarian property agency 11 560 apartments changed owners in March in Hungary. March was a strong month on the property market, far stronger than the second half of 2016, even considering the 7 per cent backlog compared to the same month of last year. The recoiling was caused by the earlier surge in property prices which forced the market to take a deep breath while potential buyers waited to see where prices were going next.
March transaction volumes and indeed the increased demand in February indicate a return of buyers to the market, which means the wait for lower prices is over. This is also supported by the increasing proportion of buyers purchasing for themselves as opposed to investors. In total, there were 29.6 thousand property sales transactions completed in the first quarter of 2017 in Hungary. In 2015 and 2016 the same figure was slightly over 30 thousand, while in 2013 it was a mere 18 thousand.
Overpriced properties on the Hungarian market
napi.hu, 05.01.2017 – A recent survey published by the Hungarian Statistical Office revealed that half of all Hungarian residential properties are worth less than HUF 10 million and one-third falls into the HUF 10-20 million category. Only every tenth property is worth more than HUF 20 million and less than five percent have a value of more than HUF 30 million. An apartment whose asking price is unrealistic will be sold with great difficulties only, no matter how strong the market is. Finding the perfect price is a key aspect of a successful sale and experienced property agents clearly have the edge here.
Overpricing can, in most cases, be attributed to one of two main reasons. In many cases the owner is also attached to the property emotionally and will attempt to reflect this attachment in the asking price. Another reason is the lack of experience: in their entire life, most people have the opportunity to sell two or three properties only, unlike real estate agents who, thanks to their professional experience, have a better overview of market prices.
First Apartment Trivia
napi.hu 14.12.16 – Demand and opportunity tend to arise ever later for young people to have their own first apartment and household. According to data collected by the Hungarian Statistical Office during the past 10 years young Hungarians leave the family home at the average age of 27.5.
During this ten-year period a total of 280,000 young people moved to their first new home, 75 per cent of them started their new life as proud owners. Ten years ago the average purchase price of the first home was HUF 9 million (approx. EUR 28 650 at current exchange rate) and it bought a studio or a one bedroom apartment.
This has also changed during the past decade although HUF 9 million does not seem a lot if we include the properties purchased in small settlements and small towns. An apartment bought for HUF 9 million ten years ago can be worth twice as much today. Only a few fortunate can buy their second apartment without having to sell the first one. The majority adds HUF 3 to 4 million to the selling price and buys an apartment with one or two bedrooms more.
Ruined apartments in the wake of Airbnb
napi.hu, 15.11.2016 – Airbnb is causing more and more problems worldwide. The scheme faces stiff opposition, too, because it poses competition for the hotel industry, reduces the number of apartments available for long-term rental and also results in increasing rental fees. The situation is the same in Budapest, where many Airbnb hosts have already become disillusioned.
A great number of owners joined the Airbnb bandwagon with high hopes a year or two ago. Some had just one single apartment and many of them are now forced to admit that this is not what they were expecting. Their properties have been devastated by foreign tourists, the revenue has been less than they had hoped for and Airbnb requires a lot more work and attention than letting an apartment for the long-term.
Short-term apartment letting involves active marketing, one must follow the dates of important events in the city and amend prices accordingly, and both the apartment and the guests need constant attention, too. If you just post your property for EUR 40 a night and hope for the best — you will be seriously disappointed.
Residential Property Price Outlook
napi.hu, 05.10.2016. – The pre-owned residential property price increase expectations in Budapest are almost the same as in the previous quarter. 28 percent of respondents of a survey expect that prices will go higher and 19 percent said they would go down. The expected overall average price increase for Budapest is still approximately 1 per cent. A material increase of about two per cent is expected in Buda and in the upmarket parts of the downtown areas of Pest. As far as the Eastern and Western parts of the country are concerned, the survey forecasts a price increase of 2 and 3 per cent, respectively, while strong regional differences will prevail. This means the national index is back at where it was six months ago while that for Budapest is somewhat lower than that. Based on the responses building plot prices will increase by 3-6 per cent in the next 12 months.