Property tax for foreign buyers could be imposed in Hungary
Hungary may soon introduce new legislation that could impose significant fees on foreign property buyers. This move is part of a larger initiative by the government to manage population growth in areas experiencing rapid demographic changes, such as Budapest’s agglomeration and the Balaton region.
A draft law, expected to take effect by 1 July 2025, would give local municipalities greater authority to regulate property ownership and residency registrations, with potential consequences for the real estate market.
The law, currently under public consultation, aims to address the challenges faced by communities struggling with an influx of newcomers, 24.hu writes based on ingatlan.com’s recent report. Tibor Navracsics, the Minister for Regional Development, has proposed that municipalities be granted five legal tools to limit population growth and reduce tensions between locals and newcomers.
The law is primarily intended for areas where migration has been particularly high, including the outskirts of Budapest, the Velence Lake area, and eastern parts of Lake Balaton. The legislation has faced criticism from investors, with concerns that it could halve property prices in these regions.
Property purchases could even be banned
According to real estate experts, the proposed law would allow municipalities to impose conditions on property purchases or even outright ban them in certain areas. However, this would not apply universally, as local authorities can choose whether or not to adopt the restrictions. In some cases, properties built in the past decade may not be subject to these rules.
A key aspect of the law is that municipalities could require newcomers to pay significant contributions, potentially in the millions of forints, to fund local infrastructure and services. Real estate prices in sought-after areas, like the Budapest agglomeration and Balaton, have reached averages of around HUF 100 million (EUR 245,000), raising concerns about affordability for local residents. These contributions could be used to improve local amenities, providing some relief to communities dealing with rapid population growth.
Foreign buyers often have greater purchasing power
Foreign buyers have also been a point of focus in the debate, as they often have greater purchasing power compared to local buyers.
In central Budapest, for example, nearly 25% of property purchases are made by foreigners.
Under the proposed law, municipalities could decide to impose property taxes or purchase restrictions on foreign buyers, potentially helping curb price increases and provide additional funding for local budgets.
The draft law has sparked debate, but its introduction could signal a change in how Hungary manages its housing market and population dynamics, with a focus on maintaining local identities and affordable housing for residents.
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