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Apartment market: price hike stalled?
Napi.hu, 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
napi.hu, 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.
Which is the most expensive country town?
napi.hu, 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
napi.hu, 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.
Property market: downturn already at 60 per cent in Hungary
napi.hu, 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.
Budapest residential property market may slow down
Napi.hu, 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.
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.
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.