Buying Real Estate in Hungary
Peter, Saturday, 9 November 2013
This article is part of a series of 8 articles about buying property in Hungary. The other articles in the series cover the following topics:
As Western European property markets gradually come alive from their 2008 collapse investors once again turn their ever seeking eyes towards the up- and-coming part of the continent, Eastern Europe. In this historically bruised region countries now all compete for the attention of possible investors, as foreign businesses and private individuals alike renew their interest in hope of lucrative opportunities.
With the European Union’s enlargement process plowing through the region in the past decade, many post-Soviet countries now once again find themselves in a new economic and social environment. In the heart of this region lies a small landlocked country called Hungary. Once a major player of the great Eastern-European economic catch-up game, Hungary now finds itself a backmarker on most GDP and development charts.
As the country struggles to regain its 90s heyday, many foreign businesses feel the time for investment has come. May it be real estate, land or other property, interest for the country has reached a long seen peak. With this challenging environment in mind we seek to answer many questions and issues regarding making a business or private investment in Hungary.
One of the first steps of finding great value in Hungary is answering the million dollar question of real estate: location. The country is abundant in beautiful rural areas, wellness and spa resorts. And then there’s the capital, Budapest, nicknamed modestly the Paris of Eastern Europe. Finding the right location however can be tricky, especially for a foreigner. Hungary is indeed very welcoming when it comes to showcasing its countless beauties, but when it comes to buying property, the romance could easily fade in a moment.
As in every country, figuring out the best and worst areas or regions is a difficult task that can only be done by a local real estate agent. One cannot emphasize the need for finding a professional and trustworthy advisor on this matter. In this case, the help of a great real estate agent can be an invaluable asset. There are several highly professional national agencies out there, and contacting them usually opens up vast number of possibilities and resources – although for a hefty price. Small real estate firms can be a more budget minded, but risky choice as many of these agents speak poor or no English.
The buying process is no easy task either. First of all, purchasing land in Hungary can only be done by obtaining the proper permit from none other than the district council of the local municipality – not to mention an additional approval needed by the Budapest Administrative Office if one intend to invest in the capital. Getting the municipality permit can be a long wait as the cases of both locals and foreigners can be delayed for months. Furthermore, all purchases must be made through a private, countersigned contract or valid purchase agreement.
When budgeting for a new property the real estate agent usually briefs – or warns – the foreign buyer about the number of taxes. The general transfer tax of property is between two and four percent, depending on the value of the transaction. In addition, payment of legal and registration fees are also compulsory. All of these mentioned payments are done by the buyer. Still, some of the costs of buying and selling property are divided between the buyer and seller. It is obvious that the buyer is the one bearing the heftier proportion of the deal. The seller’s only real expenditure is the real estate agent’s fee, which still can be a pricey two to five percent.
It is understandable that all this may seem overwhelming at first, even discouraging. The number of taxes could lead the investor to turn its attention to alternate funding options, for example mortgages. Not so surprisingly, this can be another major source of delay and difficulty.
The final step of purchase is making sure that the DOCUMENTATION is done properly. This is yet another area where foreigners feel overly confident and hence make mistakes. Finding a good lawyer who handles all paperwork is a must. Again, an English speaking lawyer with knowledge of international property rights can be a pricey endeavor, but it is an area where an investor should never go with the budget solution.
In essence, buying real estate in Hungary has some limitations for foreigners, and those looking for the quick buck in an up-and-coming property market could feel a sense of disappointment. As the markets and property prices are in a seemingly irresolvable hibernation, short term returns are almost completely out of the question. Long term investments, on the other hand, could prove to be a bit more sensible choice. Still, in a country where political turmoil seemingly never ceases to stop, one must be attracted to risky ventures to even consider investing in such a financial atmosphere. Although as the old business rule says, where one shouts crazy risk, others see great opportunity – this couldn’t be apt for Hungary.
This article is part of a series of 8 articles about buying property in Hungary. The other articles in the series cover the following topics:
As Western European property markets gradually come alive from their 2008 collapse investors once again turn their ever seeking eyes towards the up- and-coming part of the continent, Eastern Europe. In this historically bruised region countries now all compete for the attention of possible investors, as foreign businesses and private individuals alike renew their interest in hope of lucrative opportunities.
With the European Union’s enlargement process plowing through the region in the past decade, many post-Soviet countries now once again find themselves in a new economic and social environment. In the heart of this region lies a small landlocked country called Hungary. Once a major player of the great Eastern-European economic catch-up game, Hungary now finds itself a backmarker on most GDP and development charts.
As the country struggles to regain its 90s heyday, many foreign businesses feel the time for investment has come. May it be real estate, land or other property, interest for the country has reached a long seen peak. With this challenging environment in mind we seek to answer many questions and issues regarding making a business or private investment in Hungary.
One of the first steps of finding great value in Hungary is answering the million dollar question of real estate: location. The country is abundant in beautiful rural areas, wellness and spa resorts. And then there’s the capital, Budapest, nicknamed modestly the Paris of Eastern Europe. Finding the right location however can be tricky, especially for a foreigner. Hungary is indeed very welcoming when it comes to showcasing its countless beauties, but when it comes to buying property, the romance could easily fade in a moment.
As in every country, figuring out the best and worst areas or regions is a difficult task that can only be done by a local real estate agent. One cannot emphasize the need for finding a professional and trustworthy advisor on this matter. In this case, the help of a great real estate agent can be an invaluable asset. There are several highly professional national agencies out there, and contacting them usually opens up vast number of possibilities and resources – although for a hefty price. Small real estate firms can be a more budget minded, but risky choice as many of these agents speak poor or no English.
The buying process is no easy task either. First of all, purchasing land in Hungary can only be done by obtaining the proper permit from none other than the district council of the local municipality – not to mention an additional approval needed by the Budapest Administrative Office if one intend to invest in the capital. Getting the municipality permit can be a long wait as the cases of both locals and foreigners can be delayed for months. Furthermore, all purchases must be made through a private, countersigned contract or valid purchase agreement.
When budgeting for a new property the real estate agent usually briefs – or warns – the foreign buyer about the number of taxes. The general transfer tax of property is between two and four percent, depending on the value of the transaction. In addition, payment of legal and registration fees are also compulsory. All of these mentioned payments are done by the buyer. Still, some of the costs of buying and selling property are divided between the buyer and seller. It is obvious that the buyer is the one bearing the heftier proportion of the deal. The seller’s only real expenditure is the real estate agent’s fee, which still can be a pricey two to five percent.
It is understandable that all this may seem overwhelming at first, even discouraging. The number of taxes could lead the investor to turn its attention to alternate funding options, for example mortgages. Not so surprisingly, this can be another major source of delay and difficulty.
The final step of purchase is making sure that the DOCUMENTATION is done properly. This is yet another area where foreigners feel overly confident and hence make mistakes. Finding a good lawyer who handles all paperwork is a must. Again, an English speaking lawyer with knowledge of international property rights can be a pricey endeavor, but it is an area where an investor should never go with the budget solution.
In essence, buying real estate in Hungary has some limitations for foreigners, and those looking for the quick buck in an up-and-coming property market could feel a sense of disappointment. As the markets and property prices are in a seemingly irresolvable hibernation, short term returns are almost completely out of the question. Long term investments, on the other hand, could prove to be a bit more sensible choice. Still, in a country where political turmoil seemingly never ceases to stop, one must be attracted to risky ventures to even consider investing in such a financial atmosphere. Although as the old business rule says, where one shouts crazy risk, others see great opportunity – this couldn’t be apt for Hungary.
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