Investing residantial
In the eighties it was a Porsche, during the 90 s it was top-notch home entertainment. Now must have purchase is investment property and second homes. Demand for Budapest investment and overseas properties continues to soar and it is harder and time consuming for investors to source and then achieve the right opportunity. We’re here to help.
Location
Like any other city, location is a key element to any property investment decision. We recommend purchasing apartments for long-term rental purposes within the central business district, the main central shopping area and near most of the universities. These Districts include I, II, III, XII (in Buda), V, VI, VII, IX and XIII (in Pest) all of which are seeing dynamic growth and price performance. Furthermore, all of these areas are well serviced by tram, bus and the underground.
Quality
Most of the buildings in central Budapest date from the 19th century. Unfortunately during the communist period there was almost no investment in the buildings and consequently the quality of apartment buildings varies widely. Some have been reconstructed however it is important to inspect the quality of this work as once again it can vary widely. Almost all (non-renovated) Hungarian apartments are poorly laid out and would not be up to Western standards making it very difficult to rent such a product. Lastly we advise that apartments be fully furnished to achieve the best rental returns.
It is important to purchase an apartment that has been properly renovated to Western standards or alternatively to purchase an older style traditional apartment and have the work done by a professional architect, engineer and building contractor.
Size
We recommend the purchase of apartments from 50 110 square metres. Anything larger than this can be difficult to rent and the achievable yields will be lower than that of a smaller unit. The cost of furnishing a larger unit is also a factor. Looking forward as Hungarians trade up from smaller apartments these shall be the best in terms of return on investment.
Ownership
It is becoming increasingly simpler for a foreign person to own real estate in Hungary. In order to do this the purchaser must first apply to the local Municipality (council) for permission with the assistance of a Hungarian solicitor. This permission, whilst it can be refused, is usually granted within 3 months and the costs associated with the procedure are approximately 250.
The second option is to form a Hungarian company to purchase the property. We recommend this option for individuals that wish to purchase numerous properties. This approach can be done relatively quickly and inexpensively, keeps taxation low and simple, and is likely to assist in the onward sale of the property in future years when the company may be sold rather than the property thereby eliminating stamp duty for the future purchaser.
Funding
The Hungarian banks are for the most part hesitant to lend to a foreign individual for the purchase of property locally. The local banks are also very reluctant to lend to foreign owned companies set up for the purpose of purchasing property unless the company has at least a track record of 1 year and is profitable. For these reasons it is recommended that any required funding be obtained from your home country.
Taxation
It is recommended that you seek the advice of your own tax advisor before
undertaking any investment activity. The following basic taxes apply in
Hungary:
- Annual personal taxes on rental profit 20%. Note: profits may be taxable
abroad though Hungary has double taxation treaties with most countries. - Annual corporate taxes on profits 18%. Note all expenses, interest cost
and some depreciation on the property and it s contents are tax deductible - Capital gains tax on property sold by an individual 20% (which reduces
after 6 years) - Capital gains tax on property sold by a company - 18%
- Capital gains tax on the sale of a company containing property - 5%