Districts of Budapest vs Hungarian government: the quarrel over Airbnb
Online daily 24.hu reports that the districts of the Hungarian capital city are issuing more and more decrees that make it harder to open new tourist quarters in the given districts. It all started in the 5th district, where the establishment of Airbnb and other hotels depends on whether the locals agree to it or not. This continued with Józsefváros (district 8) and now with Terézváros (district 6).
Since the 1st of January 2018, a 4.8 thousand EUR (1.5 mill HUF) parking related bonus has to be paid for each room in the case of new apartment hotels. This decree is not new, although so far it has been only implemented in the case of terrace rooms.
As opposed to this, the new tax law issued by the government makes taxing much easier for hotels from the 1st of this month. However, only for the wealthier investors, as in 2018 owners can opt for the 32 thousand HUF (~108 EUR) flat-rate per room in the case of three let-out apartments.
According to the lead analyst of OTP Ingatlanpont Dávid Valkó, if all districts adopt the attitude of Terézváros towards apartment hotels, investors can turn to a long-term, “classic” renting.
Either this or they accept that their investments pay-off time will be prolonged by 1-2 years, at least in the case of a renovated property that was bought for the purpose of establishing an apartment hotel.
In Máté Váradi’s opinion (leader of Hostie, that deals with the operation of apartments as Airbnb), the fight that the districts put up with the government and the Airbnb could strengthen the black economy because investing legally in Airbnb will not be worth it money-wise for the investors who have a smaller capital. So far, investors and owners could run their renting business on rational taxing terms, but the mandatory parking bonus will represent a sort of “penalty tax” for them. Váradi adds that he hopes that the views of Terézváros will not spread out to other districts.
Airbnb flats are almost 1.5 times more fruitful than subletting
Let’s take the example of a 50 square metres flat with two rooms, located in the inner 6th district. If it is well managed and is renovated, it could represent an income of 380 thousand HUF (1200 EUR) per month, if let out to tourists. After the expenses and the itemised flat-rate tax is subtracted, one will be left with 320 thousand HUF (1000 EUR) per month. However, this is not so during the whole year.
If the same flat is let out in a classic form, it can be rented for 225 thousand HUF (727 EUR), and after the yearly 15 percent personal income tax is subtracted, one will be left with 190 thousand HUF per month (615 EUR).
Note that this profit is the same throughout the whole year.
It makes it easier for letting out the property as from this January owners do not have to pay healthcare contributions. It should be kept in mind that with Airbnb letting out takes much more time and energy than in the case of traditional renting if the owners themselves do this. In addition, flats are more worn out in the case of Airbnb.
24.hu contacted a real estate agent from downtown Budapest, a representative of which said that it would not be so bad to have less Airbnb and more apartments that could be rented traditionally, as this would help to temper the extremely high rent rates in Budapest. However, it seems unlikely that the reorganisation of the market will take place because of the parking expenses.