Budapest, Hungary Property Investment

Q: How can foreigners purchase property in Budapest?

For a foreign investor who wants to purchase real estate in Budapest
there are two ways to proceed:

1. The buyer can apply for a permit as a private person, which means
   submitting an application to the local authorities to acquire the
   properties(s). The costs associated with the procedure is approximately
   250
2. Foreign buyers can establish a local Hungarian company, usually a
   limited liability company. This is preferable if the purchaser wishes to
   acquire multiple properties.

Q. What are the Advantages and Disadvantages of buying as a private
individual vs. as a company?

As a Private Person: The application for a permit can be denied though it
is unlikely as EU integration rapidly approaches, but it will take
approximately 2 -3 months. If a requested permit is denied it is still
possible to establish a Hungarian limited liability company to acquire the
property. The disadvantages of buying a property, as a private individual is
that it is presently impossible to acquire more then one property as a
private individual and writing off expenses related to the property can be
more difficult as well.

• Establishing a Company: The advantage of buying property
  through a company is that it saves time. In addition to this all
  expenses relating to the apartment can be written off (e.g.) travel,
  accommodation, legal & agency fees, purchase (stamp) duty, renovation
  costs, furniture, utilities, and all associated services, including the
  interest on the purchasers loan. Under this approach, the company can be
  sold along with the property, which makes it attractive for future
  buyers, as no purchase duty needs to be paid. The only disadvantage is
  that the company shall require an accountant and need to submit annual
  reports; we can assist with this issue though. One disadvantage is that
  the company shall require an accountant and need to submit annual
  reports; Hungarian Investment Properties Ltd. can assist with this issue
  though.

Q: What are the steps in buying a property?

1. Upon finding a property that you like the first step is to start
   initial negotiations with the seller. (In most cases sellers are willing
   to lower their initial asking price but it is rare for a seller to go
   lower then 3 to 5% from the initial price).
2. When the price and conditions are agreed upon verbally with the
   seller the next step is to have a Hungarian registered lawyer start
   drafting the buy-sell agreement. In order to do this and ensure that the
   property is taken off the market the buyer should leave Euro 1 000 to
   start this process. This is not a fee but an initial deposit (applied to
   the price of the property) that does two things (a) ensures that the
   property is no longer available to other potential buyers (b) this
   eliminates the need to have 10% of the sale price (in cash) when
   securing the property.
   Note: the real estate market in Hungary, but especially in Budapest is
   very fast, not securing a property that you like in time has meant that
   some clients either lose the opportunity to bid (as the property is
   sold) or are drawn into a biding war with other buyers.
3. Usually the buy sell agreement that are signed include 2 main
   payment periods for the property. The first is usually within a week to
   10 days of signing the intent to buy-sell the property and is equal to
   10% of the agreed prices. Hungarian law protects buyers that place this
   initial deposit in that if so whatever reason the seller backs out of
   the contact he/she is obliged to pay 2 x s the deposit. The difference
   usually needs to be paid in full 30 to 45 days of signing the intent to
   buy-sell the property. Payment of this can be stipulated upon certain
   conditions being met inside this time period though. Examples include:
   concluding certain required work, installation of appliances, providing
   the buyer requested documentation, etc.
4. Another technicality that we recommends taking care of before
   leaving Budapest is going to a notary public and certifying the buyers
   identity from his/her passport. The issue with the public notary can be
   done at any Hungarian embassy or consulate but opening hours vary. The
   price abroad for this service is much higher then doing it locally. This
   is a prerequisite to either buying property as an individual or in
   establishing a company.

Q. How complicated is it to buy as a private individual?

To buy a property in Hungary is straight forward and will require the
following to be done:

1. Appointing a Hungarian legal representative and placing the initial
   deposit of Euro 1000/property
2. Going to a notary public and certifying the buyer s identity to
   initiate the permit approval process. If the permit is refused (which is
   a remote possibility) establishing a company is the next suggested
   option see below. The issue with the public notary can be done at any
   Hungarian embassy or consulate but opening hours vary the price abroad
   for this service is much higher then doing it locally.
3. Signing the buy-sell agreement is can be taken care of in your home
   country if time is an issue whereby the agreement is signed by yourself
   and then mailed / DHL d to your local legal representative.

Q: How complicated is it to establish a company?

Establishing a company in Hungary is a routine procedure, which can be
completed within a day.
The basic procedure is as follows:

1. The company s Articles of Association needs to be signed in front of
   a lawyer*.
2. The lawyer will also need the name of the new company, its seat, and
   the personal data of the owner(s). The founding capital of a Limited
   Liability Company is HUF 3M or Euro 12,000 this amount can be applied
   to the purchase of the property.
3. After the Articles of Association are prepared, specimens of
   signature need to be signed in front of a public notary, then a bank
   account must be opened.
4. Then all the documents, forms, authorizations and invoices must go
   to an accountant who will take care of all the administration and begin
   to prepare the required reports.

*Note: It is not necessary to be in
Hungary in order to sign the Articles of Association; the procedure can be
done at any Hungarian Embassy abroad BUT this can be a slow process.

Q: What are the legal expenses of establishing and running a company?

The initial fee is HUF 250 000 or approx. Euro 1 000 plus 25% VAT. There
is an annual fee of about HUF 10 000 or approx. Euro 40 plus 25% VAT, for
accounting and tax purposes if the company is not actively trading.

Q: Do I have to register for Hungarian social security if I am the
managing director of a Hungarian company?

No, it is not necessary. Investors ask this question because of the high
social security tax (44% of the salary) and other taxes to be paid after
each employee. A company does not need to have employees, it can operate
through subcontractors, who invoice the company for their services.

Q: What are the additional expenses when buying an apartment?

All in, these expenses are approx 8 to 10% of the sales price. This
includes:

• 6% purchase duty (stamp duty) - this is paid 6 months after closing.
  
  Note: there is no stamp duty on
  newly built apartments below HUF 30m (approx. EURO 120 000)
• 1.5% solicitor’s fee

These are in addition to the costs associated with establishing a
company, renovating, and furnishing an apartment.

Q: Do I have to pay income tax when selling property?

As a Private Person: In this scenario the tax incurred is only
20%. However, it is more difficult to account for expenses, there is no
annual amortization on the property and only after the 6th year of ownership
is the tax base reduced by 10% annually. It may be possible to deduct the
costs of travel and service fees that are associated with the property as
part of your global income; we suggest that you consult a tax advisor in the
country where you pay taxes. Hungary has long standing double taxation
treaties with most countries making this situation fairly straightforward.

As a Company: Yes, if a company sells its property 18% of any
profit (after expenses incurred relating to the property) must be paid as
tax plus 20% of what’s left if money is withdrawn as income (dividend).
After the 18% corporate tax is paid, we re left with 82% of the profit in
the company. 20% of 82%, that is 16.4% must be paid as dividend tax. Please
note that the purchase price shall be further reduced with the annual
amortization (2% or 5% per year), as well as other expenses, fees relating
to the property.

Q: Which properties are the easiest to rent out and / or sell at a later
date?

Older Apartments: Renovated, fully furnished apartments in central
areas Districts V, VI, VII, IX and XIII in Pest and Districts I, II and
III in Buda. The higher the standard of renovation, the more it appeals to
the high quality, long term, western tenants. Ideally these tenants are
businesspeople, diplomats, or foreign students.

New Apartments: Apartments that are well located, near transport
hubs (be it roads or public transportation) near areas that are of interest
for the tenant (offices, universities, parks, etc). New builds have the
advantage of having extended payment terms which means that the buyer can
pay over time and sell when the property prices have increased further.
Furthermore, new build apartments are guaranteed for 5 years after
completion, which older apartments are not.

Remember renters will have to want
to live in the apartment. If the area around the property is not appealing
to renters there is a high chance that the property will remain vacant.

Q: What is the anticipated rental income I can expect to receive?

Euro 400 for a small 40-60 sqm flat, Euro 700 and up for a larger
two-bedroom apartments; this excludes utilities that will be paid by the
tenant. You can expect an annual rental yield* of between 6 and 9%.

*NOTE: This calculation is in
HUF terms, so in Euro or USD terms, the yield could actually be higher
as the HUF has shown unquestionable strength against other major
currencies in the last few years. For example, the HUF has increased by
some 35% against the USD since the summer of 2000.

Said another way, not only will the value of the underlying property
increase in value but holding a HUF denominated asset which generates
income (monthly rent) in HUF will further magnify the value of your
holdings in Euro or USD terms.

Q: What is the tax on rent?

If the apartment is privately owned (not by a company), then it is 20% of
the rental income when renting a residential property to an individual or a
business. Foreign nationals must apply for a tax ID and issue an invoice to
the tenant; we can assist in this as well. As a company there is only an 18%
corporate tax on any rental profits.

Q: What’s the accepted management fee for a rented apartment?

10% of the monthly rent.

Q: What is the accepted commission when renting an apartment through an
agency?

One month’s rent plus 25% VAT paid upon signing the contract if the
apartment is rented for a year.

This district has a different style of architecture than the other Pest districts as it was constructed at a later stage. The part of the district near the Ring Road is very elegant and exclusive, with a large number of Hungarian s middle-class living here. On one side flows the Danube river, with spectacular views onto Margaret Island, on the other side, District 13 is bordered by Westend City Centre, the largest shopping centre of the city with a Hotel Hilton, the headquarters of Vodafone Hungary, and multitudes of restaurants.

Budapest is divided into 23 districts. Avatar International has studied the various districts, and coupled with the experience and local knowledge of the team in Hungary we are able to recommend which districts we believe our Investors should be considering.

District IX

This district is an up-and-coming area with trendy bars and cafes being built. The local municipality is investing large amounts into a development area within this district. New developments near the pedestrianised streets are most recommended for Investors.

Budapest is divided into 23 districts. Avatar International has studied the various districts, and coupled with the experience and local knowledge of the team in Hungary we are able to recommend which districts we believe our Investors should be considering.

District VIII

This district offers the cheapest priced apartments near the City Centre. Substantial capital growth is expected in this district for long-term investments over 10 to 15 years. The beautiful buildings reflect the fact that this is where the well-to-do once lived. Today the government is spending substantial amounts on the restoration and rehabilitation of District 8.

Budapest is divided into 23 districts. Avatar International has studied the various districts, and coupled with the experience and local knowledge of the team in Hungary we are able to recommend which districts we believe our Investors should be considering.

District VII

This historic, Jewish quarter of Budapest contains several synagogues, bakeries, restaurants and hotels. Located close to the City Centre, the part of the District within the Ring Road is the best for Investors who are considering renting to students studying at the Veterinary School or the Medical University.

Budapest is divided into 23 districts. Avatar International has studied the various districts, and coupled with the experience and local knowledge of the team in Hungary we are able to recommend which districts we believe our Investors should be considering.

District VI

District VI is the cultural area of Budapest. Andrassy Ut is Budapest s most beautiful Boulevard, also known as the Champs Elysee of Budapest and leads to the Opera House and Liszt Music Academy. Andrassy is crossed by the Broadway of Budapest , Nagymezo Utca. This social hot spot is host to numerous outdoor cafes and bars that spill on to the pavement in the height of Summer. Properties near the Champs Elysee or the Ring road of this residential district are sound investments. Properties in this district are cheaper than District V.

Budapest is divided into 23 districts. Avatar International has studied the various districts, and coupled with the experience and local knowledge of the team in Hungary we are able to recommend which districts we believe our Investors should be considering.

District V

This district includes the Parliament Buildings and many Ministries that make up Hungary s Administration, and is the main financial district of Budapest. A wide array of shops and restaurants also exist in District V. Considered a safe investment district, un-renovated Apartments can be purchased for 80,000 to 120,000 and converted in to attractive rental properties for the business and foreign communities living there. Capital Appreciation is strong as the number of properties available in this district is limited, with the most exclusive properties overlooking the Danube or the Parliament building.

Budapest is divided into 23 districts. Avatar International has studied the various districts, and coupled with the experience and local knowledge of the team in Hungary we are able to recommend which districts we believe our Investors should be considering.

DISTRICT III - Keréleti

Obuda (’Old Buda’) makes up District III. It was the site of the Roman encampment Aquincum, the northernmost frontier of the Roman Empire in continental Europe. Consequently, many amphitheatres and artefacts have been unearthed here. However, many of Budapest’s oldest and most beautiful dwellings were razed during the Communist period in order to make way for the huge apartment blocks just off Arpad bridge. Practically all that remains is a small collection of (restored) buildings around Fo ter.

International

The Hungarian national airline, Malev and British Airways offer
direct flights to Budapest from London Heathrow and Stansted. Prices
vary with the seasons peak times being mid-February, July and August,
plus Easter, Christmas and New Year holidays.

A number of other airlines, such as Air France, Alitalia, or CSA (via
Prague) offer indirect flights, which can be cheaper. There are also
some low cost airlines that service the capital directly from several EU
countries.

Package tour operators also fly to destinations such as Budapest,
Heviz Gyor and Debrecen.

British Airways
0845 773 3377

www.britishairways.com

Hungarian Airlines (Malev)
+36 1 235 3888
www.malev.hu
Malev UK Office:

1st Floor, 22-25A Sackville Street,
LONDON W1S 3DR
Tel: 0870 909 0577
Fax: 020 7734 8116

Local travel

Budapest Transportation

Hungary has a network of high speed inter-city trains that connects
the large towns and cities of the country. Budapest is well connected by
this rail system.

Arriving by Air

Budapest and the surrounding area are served by the Budapest Ferihegy
Airport (BUD).

Getting Around Budapest

With a low volume of traffic, car journeys are relatively short
throughout Budapest. Drivers should be aware that there is a zero
tolerance of blood alcohol level while driving. Public transportation is
both economical and efficient. Trams, trolley buses and subways operate
between 4.30 am and 11.00 p.m. Tickets are available from tobacco shops,
subway stations and street vendors. Tickets must be validated before
use. Prices start from 95 HUF for a single ticket and tourist passes of
one, three or seven days are available. Taxi fares vary and travellers
should ask fare before departure. The city has a comprehensive bus
service and of course taxis are available throughout the city.

Yellow trams rattling down grand boulevards, faded neo-Baroque interiors, facades marked with signs of revolution, streets of cobblestone, grand turn of the century apartment blocks. Like the bathers lingering in the steam of Budapest’s famous baths, this is a country infused with memories and history..

Hungary celebrated the 1000th anniversary of the Hungarian State at the
end of the last century. During the tumultuous thousand year history of
Hungary and the Central European Region, rulers came and went and empires
rose and fell, but Hungary’s distinctive charms have never waned nor its
welcome ever been less than genuine.

The foundation was laid in the ninth century by the great Magyar chief,
rp d, who after having settled in the Carpathian basin lead the people from
paganism toward Christianity. On Christmas Day, 1000, rp d’s great
grandson, Stephen ascended to the throne with a crown sent from Rome by Pope
Sylvester II. The kingdom and nation of Hungary was born.

The three hundred year reign of the House of rp d saw the country become
increasingly westward-looking and the succeeding House of Anjou brought
expansion - into Poland, towards Dalmatia - and a great flowering of art and
architecture. The first Golden Age had begun. Under King Matthias, lauded
for his fairness and justice, Hungary flourished, but his passing eventually
led to decimation under the Ottomans for 150 years during the 16th and
l7th-century. However, the Habsburgs helped oust the Turkish, heralding a
more stable time of reconstruction.

As the Habsburg Empire floundered, a revolt in 1848 resulted in the dual
monarchy of “Austria the empire, Hungary the kingdom”. In 1867 there were
two capitals, two parliaments. This “age of dualism” sparked an economic,
cultural and intellectual rebirth in Hungary. The second golden age had
begun.

Turn of the century Budapest was rightly considered the birthplace of the
modern world. World War I proved disastrous, however. Partitioned into
almost one-third its original size, millions of ethnic Hungarians found
themselves living outside the country. Russian intervention followed after
World War II as Stalinism lowered its iron curtain across Central Eastern
Europe.

But at the turn of this new century, Hungary is now a free country for a
decade and combines a smiling, dynamic image with a reputation for
nostalgia. In this post-communist era of rapid change, the visitor will find
constant reminders of a largely vanished Europe - old-fashioned customs and
courtesies like kissing of hands and the presentation of flowers. Nowadays
Modern Hungary is experiencing a new Renaissance. With its colourful people
and the 21st century mix of ethnic influences this was almost eerily
predicted. St. Stephen, Hungary’s first king said: “Therefore I command you
my son, to extend a benevolent protection and respect towards newcomers, so
that they would rather stay with you instead of settling somewhere else.”.

Budapest has over 1,000 restaurants offering Hungarian and international cuisine. You will not have any difficulty in finding a place to eat which suits your taste and budget. Only larger restaurants in Budapest have their menus printed in foreign languages.

Hungarian Cuisine

The great traditions of Hungarian cuisine have, in the last
ten to fifteen years, successfully mingled with modern sophistication. At its
roots, classic Hungarian gastronomy is nothing less than French bonne bouches
reaching Hungary via Austria and mixing with ancient Hungarian peasant dishes -
many of them originated in Asia - offering every gourmand something to his/her
taste.

The first thing that people recall about Hungarian cuisine is
goulash, which is, contrary to popular belief, not a stew but an artistically
prepared thick soup. Sour cream is often used to soften the flavour. You must
try fish soup, chicken paprika, a good home-made p rk lt (stew) and the
excellent fresh-water fish: grilled pike-perch, trout with almond. Also
compulsory is goose liver. Whether fried or grilled, cold or hot, it is simply
unforgettable.

Desserts really deserve a separate chapter. The most
delicious ones are strudels, Gundel pancakes, soml i dumplings and gesztenyep r
(cooked chestnuts mashed, topped with whipped cream). Specialities include salty
and sweet pastas, of which t r s csusza (pasta with curd and sour cream) is
warmly recommended.

Hungarian Wine

Hungary’s annual wine production totals 4.2 million
hectolitres mellowed in 22 historical wine regions. Budapest is known for its
sizeable storage and bottling capacity.

Louis XIV, the Sun King, was such an admirer of world famous
Tokaj wine that he termed it the “Wine of kings, the King of Wines”. Wine of the
Balaton region, the full-bodied Vill ny-Sikl s, the famous wines of Eger and the
Egri Bikav r (Bull’s Blood) in particular also enjoy a wide international
reputation.

Take a sip of world famous Hungarian wines in Budapest, or
enjoy a Tour de Vin!

Hungary is situated in Central Europe, sharing borders with the Slovak Republic, Ukraine, Romania, Croatia, Serbia, Austria and Slovenia. There are several ranges of hills, chiefly in the north and west. The capital city of Budapest, situated on one of the most beautiful areas of the Danube, is made up of two parts Buda and Pest. The former is the older, more graceful, part with cobbled streets and medieval buildings; the latter is the commercial centre. The capital is a lively city that has long been a haven for writers, artists and musicians.

International Travel to Hungary

By Air:
The national airline is Mal v (MA), operating flights to more than 40
cities.

For further information, contact:

Malév Hungarian Airlines

22-25A Sackville Street

London W1S 3DR

Tel: 020 7439 0577

Fax: 020 7734 8116

website: www.malev.hu

Other airlines serving Budapest airport include Aeroflot, Air France, British
Airways, KLM, Lufthansa, Swiss and United Airlines.

Approximate flight times: From London to Budapest is 2 hours
20 minutes.

International airports:

Budapest Ferihegy (BUD), 16km (10 miles) from the city (travel time 30
minutes).

There are now two passenger terminals; A is used exclusively by Mal v
and B by all other airlines. Facilities include a duty-free shop,
florist, newsagent, restaurants and bar, bureaux de change, banks,
tourist information centre, gift shop and post office.

Regular coach and bus services are available to the city, costing around
Ft800 for the centrum bus and approximately Ft1800 or Ft3300 return for
the airport minibus, which runs to and from any address in the city.

The 93 bus runs an express service between the underground terminus at
Kob nya-Kispest and the Ferihegy terminals, however you need a
pre-purchased or season ticket.

Taxis are available at all times.

The major car hire companies are represented.

Departure tax: None.

By River:
From April to October there is a daily hydrofoil service run by
MAHART between Vienna, Bratislava and Budapest.

The journey costs approximately 75 for a single and takes 6 hours.
Reservations must be made in advance. 20kg of luggage may be carried
free of charge. Passengers arriving by boat are advised to reserve a
taxi through the shipping line, as none are readily available on the
dock.

For further details contact:

MAHART at Belgr d rakpart

1056 Budapest

Tel: (1) 484 4000

Fax: (1) 318 7740

Website:
www.mahartpassnave.hu

By Rail:

Direct rail links connect Hungary to 16 European cities and there are
47 international trains daily to Budapest. Inter-Rail, Eurotrain and RES
concessions are valid on the Hungarian State Railways (M V). Between
Dresden and Budapest there is a car transport system. The Wiener Waltzer
from Basel travels via Zurich, Salzburg and Vienna to Budapest. First-
and second-class day carriages run from Basel through to Budapest and
both sleeping cars and couchettes (the latter second-class only) as far
as Vienna. There is a minibar service in Switzerland and Austria, and a
dining car in Hungary.

There are two main routes from London: via Paris or Brussels (Eurostar
connection from London) to Vienna (including a Paris-Vienna EuroNight
service), where several direct trains run daily to Budapest-Keleti; or
via Brussels (Eurostar connection from London) to Munich, where several
direct trains run daily to Budapest-Keleti (including a EuroNight
service). Luggage allowances: 35kg for adults, 15kg for children.

Note:

Travellers leaving Hungary by train must pay their fare in convertible
currency. Most generally recognised international concessionary tickets
are accepted in Hungary.

For further details contact:

M V at Budapest VI

Andr ssy t 35

Tel: (1) 461 5500 (international timetables) or (1) 461 5400 (internal
timetables)

Website: www.mav.hu

Seat reservations are strongly advised for all services.

By Car

Route via The Netherlands, Belgium and Austria and from Vienna via
the E5 Transcontinental Highway which passes near Bratislava (Slovak
Republic).

Bus connections are available from most major European cities, check for
further details with Volanbusz (Website:
www.volanbusz.hu
). Eurolines, departing from Victoria Coach Station in London, serves
destinations in Hungary.

For further information, contact:

Eurolines

4 Cardiff Road

Luton

Bedfordshire

LU1 1PP

Fax: (01582) 400 694

Website:
www.eurolines.com or
www.gobycoach.com

The Channel Tunnel:

Eurotunnel operates trains 24 hours per day through the Channel
Tunnel between Folkestone in Kent (with direct access from the M20) and
Calais in France. All vehicles from motorcycles to campers can be
accommodated. Eurotunnel operates three to four passenger trains per
hour at peak times. The journey takes approximately 35 minutes.

For further information contact:

Eurotunnel Reservations

Tel: (08705) 353 535

Website:

www.eurotunnel.co.uk

With Hungary s accession in to the EU in May of 2004 supported by further liberalisation, Budapest is on its way to becoming one of the biggest economic engines of Eastern Europe. With its architectural beauty and financial growth, it has become an ideal location for Investors.

Investment Fundamentals/Fact Sheet

• Budapest residential property is currently trading at more then 50%+
  discount when compared to other European capital cities
• Budapest is not a holiday market like the Mediterranean coast -
  long-term tenants include foreign employees, foreign students and
  Hungarian business people. There is constant rental demand for well
  located, renovated Western style apartments
• The purchase process is fairly simple. The land registry system and
  the legal apparatus provide a secure framework. Although not required by
  law, most private investors choose to establish a company in order to
  buy an apartment, because it makes the purchase quicker and leaves more
  room for further investments or tax planning.
• Annual Yields of between 6 to 9% can be achieved on residential
  apartments
• Annual capital gains for residential property are forecast at +15%
  depending on the location and the size of the property
• Corporate tax is 18% with further tax and financial investments
  available to international corporations seeking to establish in Hungary
• Hungary is on track for EU accession in May 2004. EU accession will
  bring lower mortgage interest rates as well as ease of receiving loans
• Mortgages, though available, are harder to obtain then in EU
  countries after accession this shall change, fuelling demand for real
  estate at all price points. Presently it is almost impossible for
  foreigners to obtain housing loans in Hungary.
• EU accession shall increase EU funding for infrastructure
  development. The capital has a fairly advanced public transport system
  and infrastructure.
• The economic fundamentals exist for the continued strong performance
  of the Hungarian economy over the next 3-5 years. This performance
  should see property prices gradually move toward the levels of other
  major European cities.
• Cheques are not accepted in Hungary, so you must give a week to two
  weeks for money to arrive by bank transfer. A down payment of around
  10pc will be paid in cash/bank transfer.
• Proof of the buyer s identity is required as a result the a
  notarised copy of your passport will be required to sign the
  sales-purchase agreement

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%

The primary reason is that many of our clients simply buy off plan without seeing the property first. During the Communist regime some apartment blocks suffered badly from lack of investment and whilst efforts are being made to rectify this they are not always successful. In Hungary we only recommend that purchases are made like this if the apartment is not older then 5 years.

This situation will be resolved in time and it does not detract from Hungary as a wise investment but in the short term at least, we have decided to refrain from listing older properties and concentrate on new properties which are of an international standard.

Of the properties currently listed in our database (at time of writing this was only 12, but these 12 represented some 3500 different properties) there are 2 which represent outstanding opportunities.

We briefly showcase these developments here.

Renaissance House…

Located in the historical district VII that is being rehabilitated totally in the next few years to be a new cultural and entertainment centre of downtown Budapest:

• Central location with superb
  public transportation
• Excellent rental
  possibilities
• Close to downtown business
  district and large office centres nearby
• Unique building with all
  natural material used
• Expected capital
  appreciation of 15% pa
• Inner green garden
• Underground parking with
  card operated gate and CCTV system for 111 cars
• Retail spaces on the ground
  floor serving the residents
• 5 minutes walking distance
  from downtown Budapest, the Music Academy and main hotels
  

Platan Lawns Residential Park…

Property:

Platan Lawns Residential Park consists of 4 separate buildings: A, B, C, and D. All equipped with elevators. The 5-story buildings have duplex apartments on the top floor and underground garages in the basement floor. The four buildings house 323 apartments of various sizes ranging from 35m to 158m . There is underground parking space for 167 cars and open air parking plots for an additional 160 cars.

Buildings:

The walls are made of brick with concrete reinforcement. The roof is made of red ceramic tiles. Insulated glass panel doors and windows are applied for effective sound and heat insulation. White d cor paint over thermo insulating plaster and red brick over thermo insulating layer are applied on the fa ade. The interior walls of the common areas have white d cor covings; the floor tiling is made of granite powder ceramic tiles.

Economic and policy background

Since the introduction of the new housing policy of the central government in 2001 the output of new dwelling construction has increased quite steadily throughout Hungary. Due to this, large developers became extremely active, mostly in the Budapest housing market. During the year of 2003 the number of dwellings put to use was about 6,300 in Budapest and as the new permissions testify 11,800 new dwelling constructions were started. Compared to the 2002 figures this means 15.9% increase in constructions issued. Such an increase had not been forecast by previous data, this boom took place during the last quarter of the year as a direct consequence of a change in the government s housing policy. Despite the recent aggravations both for buyers and developers, no significant decline is expected on the market.

The connection between general economic trends and the performance of the Budapest property market is obvious. The following table reveals a steady GDP-growth in Hungary, well above the EU15 average. The figure for this latter (EU15) in 2003 was only 0.7%, compared to 2.9% in Hungary. Future projections estimate that this difference will remain in mid-term.

Back to the city

There are several large-scale projects on the way or starting recently in Budapest, and lot more in the pipeline. The largest is the Marina Part project in District XIII, where, according to the plans, around 4,000 dwellings will be built near the Danube, in several phases. The largest rehabilitation program (Corvin-Szigony project), is to start in the near future; it covers the building of 2,500 new dwellings and the renovation of 1,400 older ones in District VIII, giving a large impetus for the development of this area.

The largest developers if they have the possibility concentrate on the city centre of the Pest side (District VI, VII, IX), or targeting the Danube oriented locations (District XIII, III and as for the future plans District XI). By now, the decade-long process of suburbanization slowed down a bit, and the gradually renewed city is becoming more attractive for the home-buyers. However the extremely high price of the remaining few construction plots significantly increases the prices of flats being built here.

The demand for inner city parts of Pest is enhanced by forecasts expecting significant growth in prices due to EU-accession in this segment. The residential redevelopment of the brownfield zone stretching through the Pest side considered as the reserve area of Budapest has not yet started in large-scale.

On the Hungarian housing market, a general price increase is estimated by professionals, both by investors, developers and agencies. Despite that during the last 2-3 years the inner city zone was the area where prices grew most, this process will not likely to slow down significantly in the next years. Since 2000 an average 80-100% increase could be detected in District VI and VII, in nominal value. For the year 2004 as a whole, because of the quite limited supply in quality dwellings 15-20% price increase would be reasonable in these most desired downtown areas. In this location (inner parts of District VI, VII, IX and District V), after the EU accession the pace of price growth will surely remain at this high level.

As for the newly built units in Budapest an average 15-17% nominal price increase is estimated by the end of 2004, compared to the Dec 2003 figures. In locations with limited development possibilities (near the Danube, downtown of Pest, inner part of the Buda side) higher price growth will be seen.

View on the Danube

Homes by the Danube are traditionally popular amongst well-to-do purchasers. The penthouse apartments of the newly built condominium close to the new National Theatre by the Danube (District IX) were sold at extra high prices, mostly to foreign buyers. Dwellings with panoramic view on the Danube are purchased in 90 % for investment purposes, as second or third apartments. Also on the Pest side, home-buyers are willing to pay even a million HUF per sqm for a second hand dwelling in good condition, with panoramic view on the Castle Hill.

As for the Castle District (District I), Anjou Residence, being the only new project under construction represents a good example of the price increase effect of unique features. By the lack of new construction sites on the top of the Castle Hill, the price of the elegant dwellings at the Anjou Residence, equipped with several kinds of luxury elements, is very stiff; it is between 900,000-1,4 million HUF per sqm. The price of the cheapest unit equals to the amount of 15 years average gross salary in the capital

The prestige of the Danube shore is strengthened in the Buda side as well. On the R mai-part shore (District III), stretching north from the jpest railway bridge, several residential park constructions have started during the last months, close to each other. Developers are building upon the attractiveness of the river and the wonderful view. Out of the unique ambience buda coast, there are no larger areas to be built-in near by the city centre.

Investment possibilities

In the last decade foreign investors were mostly interested in the office and retail property market part of the Hungarian, primarily Budapest real estate market. However, in the last one and half year, thanks to the above examined favourable market environment attention turned towards the residential market. It seems development will be long-term in this segment, what is confirmed by experts forecast of further price increase in the Budapest area.

Examining the long-term processes, as the Budapest market is developing and is getting mature, foreign investors are discovering other areas of the city (Buda side). During 2003 about 1,000 dwellings in Budapest had been purchased by foreigners for the value of some 10 billion HUF. This is about 5% increase compared to the 2002 figures. The majority buys for their own use, but the investment purpose becomes more and more significant. Among the Western nations Irish, British and American investors remarkably increased their activity, while German buyers are traditionally on the first place in number and value of deals.

Among foreigners the most popular area is the downtown, where they are seeking for dwelling with average size (70-100 sqm) and price (20-35 million HUF) parameters. In District VI 142 units were sold, while in District V 109, in Distict VII 92 dwellings were bought by foreigners. Their confidence can be further increased by the average 5-7% yields what is higher than the ordinary returns in Western Europe, by the nice general look of Budapest, its attractive natural environment and the development of the quality of the real estate stock.

Budapest, the largest city, is the capital and also the cultural, economic and industrial centre of Hungary. Approximately 1.8 million people - 18 percent of the country’s total population - live in Budapest. The capital is located along the two embankments of the Danube. The Buda side of the city reaches up to the hills, while the Pest side was built on the flood plain of the Danube. The 235-meter high Gell rt Hill rises on the Buda side of Budapest, nearly in the centre of the town, offering a fine view to the capital. Seven public and two rail bridges span the Danube in its Budapest stretch.

Among the many spectacular sights of the capital there is the Royal Castle and the Castle District. The extremely rich collection of the Hungarian National Gallery and the country’s biggest library, the National Sz chenyi Library is in the Castle too. On the Pest side rises the neo-Gothic building of Parliament. The numerous thermal and curative springs deservedly elevate the capital to the rank of ‘city of spas’.

Culture

Hungary was the homeland of Franz Liszt, B la Bart k and Zolt n Kod ly, whose music was inspired by the rich national folk traditions. In the 19th century Hungary produced its first important native-born composer, Ferenc Erkel, who composed the Hungarian national anthem and the first Hungarian opera. Hungary is a highly musical country; its violinists and pianists are particularly celebrated virtuosi world-wide. Hungary has more than 5000 public libraries, and more than 100 public museums are maintained throughout the country. In 2001 Hungary continued to strengthen the structures necessary to participate in Community structures. The decision of the Association Council on the participation of Hungary in the “Culture 2000″ programme was adopted by the Government and entered into force in July 2001.

Naturally Budapest

Budapest is unique among European capitals, oft quoted as the town of caves and medicinal waters. Eight protected natural resources can be found in this city of two million. The excursion spots and the caves open to visitors can all be reached by public transport. For pleasant walks we suggest Gell rt Hill and Tab n on its slopes, between Buda and Pest the Margaret Island, on the Pest side the City Park and N pliget.

• P lv lgy Cave (P lv lgyi Barlang)
  The stalactite-rich cave, the longest in the Buda Hills and the third longest in Hungary, was discovered in 1904 during quarrying. It has been a nature-protected area since 1944. So far more than 7200 meters of winding passageways have been explored; the vertical dimension is 104 meters. Some may find the 500-metre cave trip rather tiring in view of the different heights to be mounted.
• Szemlõ Hill Cave (Szemlõ-hegyi Barlang)

  2200 meters have been explored, the vertical dimension is 50 meters. The site is a listed nature protection area, and the visitor will find that the cave walls are covered with aragonite crystals.

• Sas Hill Natural Reserve (Sas hegyiterm szetv delmi ter let)
  The 266-meter-high Sas Hill, a huge outcrop in the middle of the city, has retained the cold- and
  warm-loving plants of the dolomite flora, and it is the habitat of the protected Hungarian, or Pannon lizard.
• Budakeszi Game Park (Budakeszi Vadaspark)

  A vast forest with marked footpaths, about 8 km from the city centre. Natural flora, indigenous and naturalised animals of the Buda Hills, observable from lookout hides.

• Martinovics Hill (Martinovics hegy)
  The top of this 259-metre-high hill affords a remarkable view. The hilltop is a nature reserve and a popular meeting point for dog owners.
• Budapest Botanical Gardens (formerly known as Fûv sz garden)

  Scene of the famous children’s novel “The Boys of P l Street” written by Ferenc Moln r, featuring Orchid and Bromeliad exhibitions.

• Buda Arboretum of the University of Horticulture
  and Food Industry
  The 7.6-hectare arboretum, established in 1893, has been protected since 1975. Now it boasts over 1,400 tree species. Free entry

Hungary is a heart-stealer; it will lure you back again and again to sample its rich wines, lounge in its thermal spas, gaze at its birdlife and make one more attempt to master its hermetic language. It has all the luxury of Western Europe with a Magyar twist and at half the cost.Its graceful capital Budapest has a lively arts, caf and music scene, and is host to a range of cultural and sporting festivals. In the countryside you’ll
find majestic plains, resort-lined lakes, Baroque towns, horse markets and rustic villages.

General

Though it can be pretty wet in May and June, spring is just glorious in Hungary. The Hungarian summer is warm, sunny and unusually long, but the resorts are very crowded in late July and August. Like Paris and Rome, Budapest comes to a halt in August (called ‘the cucumber-growing season’ here because that’s about the only thing happening).

Autumn is beautiful, particularly in the hills around Budapest and in the Northern Uplands. November is one of the rainiest months of the year, however. Winter is cold, often bleak and museums and other tourist sights are often closed. Animal lovers might also want to skip this season: many of the women are draped in furry dead things throughout the winter.

Events

Hungary’s major celebration is the Budapest Spring Festival (March), a two-week cultural extravaganza of local and international performances, conferences and exhibitions. Other important events include: the Budapest Film Festival (February), which premieres new Hungarian films; Bus j r s (Moh s; February also), the nation’s top Mardi Gras; Sopron Festival Weeks (Sopron; June/July), showcasing ancient music and dance performances; the Folk Arts Festival (Nagyk ll August), one of the biggest and best events of the year; and Jazz Days (Debrecen; September), which is Hungary’s top jazz festival.

Off the Beaten Track

• Hortobágy National Park

  This huge national park offers some of the best bird-watching in Europe: over 310 species have been spotted here in the past 20 years. Among the fragile wetlands, marshes and saline grasslands are many types of herons, egrets, spoonbills, storks, warblers and eagles. The park is also home to the great bustard, one of the world’s largest birds, which stands a metre high and weighs in at 20kg. A visit to the best parts of the park requires a guide, and travel must be done by horse, carriage or on foot. The wildlife preserve is about 40km west of Debrecen, in the Great Plain.

• Máriapécs

  The tiny town of M riap cs is an important place of pilgrimage. Devotees are drawn to a gorgeous Greek Catholic church, which houses the Weeping Black Madonna, an enormous and unbelievably ornate iconostasis that now takes pride of place above the altar. Even Pope John Paul II hurried here in 1991 to pay homage to the miraculous image, which is why the church is in good condition today. What was surely known to him - and not to others - is that this icon is not the original, but a 19th-century copy. The real one is kept in St Stephen’s Cathedral in Vienna.

• Pannonhalma Abbey

  Founded by Benedictine monks almost 1000 years ago, Pannonhalma Abbey has been destroyed and rebuilt many times and is now a crazy quilt of Turkish, Romanesque and Gothic architectural styles. The interior is beautiful, despite the butchery, and includes a neoclassical library containing some
  300,000 volumes (making it the largest private library in Hungary); historical archives holding some of the earliest surviving examples of written Hungarian; a gallery with works by Dutch, Italian and Austrian masters from the 16th to 18th centuries; and, above the red-marble arched doorway, a fresco depicting the patron, St Martin of Tours. Look down to the right near St Martin and you’ll see, written in Latin, perhaps the oldest graffiti in Hungary: ‘Benedict Padary was here in 1578.’ Pannonhalma is a
  working monastery, and must be visited with a guide. It is in the tranquil village of Pannonhalma, 18km southeast of Gyor, in Western Transdanubia.

Budapest and Hungary property investment

Looking for Property or real estate in Budapest or somewhere else in Hungary? Our property sales finds properties for you to invest in Budapest, Hungary. For property in Hungary and in the central, check our property investment service first. We’re confident that our Hungary property and real estate service can furnish you with property in Hungary and investment opportunity you require. For an efficient property service, we recommend you come to us and experience our online property in Hungary service for property and real real estate investments in Hungary and our wide knowledge of the best real estate agencies in Budapest. Property buyers of the UK can now rejoice in the news that it’s easier to find an investment in property in Hungary with our online service.