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home about us Farmers Journal - 28 February 2004
The Irish Farmers Journal - 28 February 2004
Irish Farmers Journal - 28 February 2004

Strong demand from Irish for residential property in Budapest
By Shirley Busteed

It is reported, that among the purchasers of property in Budapest, Irish investors purchase approximately 40-60 flats each week. Stan Ward, from a Hungarian-based property firm called A1 Real Estate, said the greatest demand for property in Budapest is from Irish people, most of whom just want to invest their money while a tiny percentage actually live in the city. Investing in Budapest is not a recent phenomenon: foreigners have been buying property there for the past few years and undoubtedly, those that invested at the initial stages of growth, will certainly be rewarded in terms of property appreciation within that period. However, Stan claims that annual appreciation of up to 30 % in addition to an average rental return of 6-8 % can still be achieved in Budapest.

Hungary is the fastest growing of all the 10 countries that are set to officially join the EU in May. The increase in the number of direct flights to 19 a week by British Airways is testimony to this. Budapest today is like Dublin 10 years ago before the onset of the celtic tiger. The strong growth in property development and the attractive prices in the past have been an incentive for foreign investment. The movement of major companies such as Electrolux and Nokia to Budapest have created a strong demand in the residential rental market. The monthly rent for a typical two-bedroom flat is €750.

Currently, the euro is approximately 20 % stronger than the Hungarian „forint”, which makes the driving seat more comfortable for most Western Europeans, especially in terms of purchasing power.

When purchasing, Stan said that the smart money is in the older well-established neighbourhoods, where residential accommodationis appreciating by 25-30 % per annum. A modest renovation to a building will immediately add another price appreciation of 20 %: this is why some investors opt to refurbish and renovate older buildings themselves. Newer buildings are appreciating at a rate of 15-20 % annually.

When buying a property, it is recommended to form a limited company, between, for example, a husband and a wife. This legal document is called a „Bt”, and can be completed within a day at a cost of €600. One of the favourable aspects of a Bt is the lower tax rate that has to be paid when an investor sells her/his property (similar to capital gains here). A company pays a tax rate of 16 % after selling a property, compared to 20 % when a private individual sells a property. In addition, before buying, a private individual has to be granted permission from the Hungarian land registry, which can take up to a month to get a reply. One extremely important aspect when buying any sort of property is to ensure the authenticity of the title and deeds. It is imperative that all the legalities are above board.

A1 Real Estate provides a service that helps a potential investor to seek the preferred type of property, to organise the formation of a „Bt” and ensure that all legal documents are genuine. This particular company charge a fee of 3% of the purchase price. If the investor opts to rent out his/her newly acquired flat or house. A1 Real Estate will assist in this process for the year at a cost of one month's rent. When buying property, a 10 % deposit is required initially while the remaining 90 % has to be paid within 21 days.

Property prices start at €75 000 for two-bedroom flats. In past, investors from Ireland include a range of profession from teachers and doctors to lawyers.

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