Letting out to become more profitable in Hungary

As we reported, rental prices have been increasing unstoppably for years in Hungary. Thus, it is more and more impossible to find an affordable apartment or even a room in big cities. According to Magyar Nemzet, letting out might become an even bigger business from January on, because the government reduced the relevant taxes radically.

 Yields increase, letting out becomes even more profitable

Ákos Balla, stated that demand for rents has not changed, so it is unlikely that owners would lower rental prices. As a result,

remarkably high rental prices might remain

– added the owner-manager of Balla Ingatlanirodák, a Hungarian real estate agency.

In fact, individuals letting out their real estates have to pay currently a 15% VAT and a 14% health insurance contribution. However, parliament abolished the latter from January next year. This could mean lowered rental prices, but demand is so high that the additional income is expected to remain at the owners. Thus, letting out a flat will become even more profitable from next year on, than it was before. Since demand is permanent a 12-20M forints (EUR 38,000 – 65,000) invest means an

approximately 4-5% yield now, which might increase to 7-8 percent next year.

Students and young employees are the ones mostly in need of rooms and flats

In fact, rental prices only have lately risen by a few percents lately, but they show significant regional differences. For example, the average price for a square meter without utility bills in Budapest is 2-3,000 forints/month now (EUR 7-10), but in some more popular parts of the city one can bump even into 4-5,000 forints/sqm (EUR 14-17). In contrast, rents are much lower in the countryside, approximately 1,500-2,000 forints/sqm (EUR 5-7).

Of course, the highest demand for rentable flats is in Budapest and big cities like Győr, Pécs, Szeged, Debrecen and Miskolc. This is not surprising since these are university centres, as well. However, more and more would like to rent flats or rooms in regional centres like Kecskemét, Eger, Dunaújváros or Szombathely. To tell the truth, these are only small centres regarding higher education, but important hubs regarding car-industry and attached companies.

Rental high season is at the end of summer when the big wave of students admitted to higher education storm the real estate market hoping to find a cheap downtown apartment or room. At that point of the year it lasts only days until owners find tenants. In addition,

they can even increase the original rental fee by 20-30%,

if the real estate is in the centre or not far from the institutions of higher education. In contrast, the end and the beginning of the year are the quietest time periods.

Government should help

According to some experts, remarkably high rental prices could only be reduced if the government started

a social housing program aiming to help people with lower income.

As we reported, Hungarian opposition party Jobbik has been talking about a similar program for long. According to a 2015 press conference, deputy leader Daniel Z. Karpat told that first a state-subsidised home rental scheme was needed which would allow people to rent homes at half or third of the market price. Such a scheme would give a boost to the construction sector as well, he noted. He added that the second step would be

to assess the current stock of vacant apartments.

He estimated that several hundreds of thousands of properties owned by the state, local councils and private individuals are empty. According to Z. Karpat, government should utilize the tens of thousands of such homes. The party’s third proposal is to reduce the VAT on building materials for new homes and for refurbishment projects to 5 percent. So far, the government has done only the third element of the project.

Source: mno.hu