There are various reasons for the steep price hike in Hungarian real estate, like economic stability, increased wages, moderate interest rates, and low unemployment rates. But those are not the only factors; the government also offers programs to help people buying homes reports Property Forum. Furthermore, the prices of new units in 2018 went up with 18.4% while the prices on the second-hand market increased by 10.8%. At the same time, there was an increase of 4.7% in the number of sold properties on the second-hand market in 2018, which is the sixth year of growth in a row.
PROPERTY SUPPLY REMAINS STABLE
Despite the steady increase in demand, the supply for properties has mostly remained stable. The number of approved building permits increased by 0.9% in the first 6 months of 2019 (18.227 permits were approved). The number of completed projects was 6.472, a decrease of 0.7%.
OUTLOOK FOR THE HOUSING MARKET
In Q2 the Hungarian economy grew by 4.9% compared to the year before while a 4.4% expansion is expected for this year, making it the 7th year of uninterrupted economic growth. Unemployment decreased from 3.7% in 2018 to 3.4% in 2019. Expectations are that the Hungarian housing market remains its strong position as a result of steady economic growth.
Even though it is easier to set up a company in Hungary to buy property, as in this case a permit is not required and the procedure takes no more than 2 days. Purchasing real estate in Hungary as a foreigner has to be done through a purchase contract, confirmed by a lawyer. Foreigners also need the approval of the relevant Administrative Office when buying property as a private person, a process that takes about 2-3 months.
FAIR RENTAL YIELDS IN BUDAPEST
Budapest is the primary indicator of rental yields in Hungary with gross rental yields at 5.6% in Buda (the green and quiet part of town) and 5.2% in Pest (the business and tourist centre of the city). Although rental yields in Budapest are quite acceptable, property transaction costs are rather high. These moderate returns come with prices per square meter of EUR 2.000-2.200 in Buda and EUR 2.500 in Pest. Smaller units tend to be cheaper per square meter on both sides of the Danube.
TAXES AND OTHER COSTS
Hungarian taxes are considered to be average to high. Here are the most common taxes applicable in Hungary.
Rental income: 15%● Capital Gains: 15%● Inheritance: 0% when inheriting from a spouse or family member.● Income tax: 15%