There are many tendencies on the Hungarian real estate market that mirror those in the US. Forbes.hu has investigated the Hungarian relevance of Zillow Talk: The New Rules of Real Estate, a book examining the American real estate market, and found many similarities between the two countries.
Stocks or real estate investment: undecided in the long run
The study investigated which brings a greater yield over a long period of time: investment in real estate or stocks. The real estate yield was calculated with an average 7pc rental yield, without which this form of investment would fall short over any period of time. If the property is rented out, the data shows that since 1991, real estate either proved a better investment or the results equalled those of stocks. In the past two years, the Budapest Stock Exchange took off and now stocks are in the lead 29 to 16pc.
The Budapest-countryside divide has grown enormous
Despite the huge increase in property prices in the last 3 years, the property price index has hardly exceeded its 2007 peak. This means a slow decrease in the seven years after 2007 and a 3-year intense increase since then. The reason for this is mostly the fact that even in 2016, prices in villages were 10pc lower than 10 years ago. As for the growing divide, price increase in Budapest is approaching 80pc while in provincial towns, it is around 20pc.
The American data shows that the biggest yield is achieved if we invest in the areas which are to become popular in the near future. Thus instead of the city centres, the areas near downtown are experiencing the biggest price increase. In Budapest, prices in Inner Erzsébetváros (District 7) are 38pc above the Budapest average, while Inner Terézváros (District 6) stands 21pc above the average.
The name matters: a way is more expensive than a street
It may seem hilarious and unbelievable but in the US, street names alluding to the proximity of water (ocean, or lakeshore) can increase the prices greatly. Properties in streets with ‘way’ or ‘place’ in their name also sell at much higher prices since these suggest a more sophisticated environment. In Hungary, real estate in a ‘fasor’ (referring to a street lined with trees) is 46pc more expensive, while ‘sétány’ (walkway) in the name can increase prices by 14pc.
Millions per square metres in the most expensive streets of Hungary
According to the 2015 data, the most expensive street of Hungary is Orom street in the Castle where property costs 1.22 million forints (3900 euros) per square metre. Another street, the Ormodi street in District 12 was also above a million; here a square metres of property costs 1.09 million (3400 euros). As for Lake Balaton, properties in Gyógy square in Balatonfüred go for 789 thousand forints per square metre (2500 euros).
The bathroom is worth renovating, the kitchen not so much
Renovation before selling a property is not always worth it. The American data shows that renovating the bathroom increases the value of the property by 71pc of the invested money. However, installing new furniture in the kitchen only increases the value by half of the investment. There’s no available Hungarian data, but the general rule of thumb is that the worse condition a property is in, the less profitable it is to start extensive renovations, especially since the new owner will most likely prefer to do it themselves instead of paying extra for a partial renovation.