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News: Hungary for affordable property?

Mon, 16 Jul 07

Since obtaining full EU membership, Hungary’s property market has moved into overdrive...

Over the past five years, foreign interest in Hungary, and in particular its capital city Budapest, has been high. Many invested, both privately and commercially, in new build city centre developments pre EU accession to capitalise on the demand for high quality rental accommodation sought by the employees of large multinational companies such as Siemens and Hewlett Packard who were opening up offices in the country.

However over the last few years since obtaining full EU membership Hungary’s property market has moved into a new phase. Central Budapest has seen property prices rise beyond the means of most Budapestians and in its place a new opportunity has risen – affordable suburban living in Budapest’s outer districts to the south and east. 

Budapest is a vilagvaros (world class city) that spans the magnificent river Danube. It strives to retain its Hungarian culture through preserving traditional architecture, spas and cuisine yet also embraces its western European neighbours.

Home to 1.7 million people, Budapest accounts for over 60 per cent of the country's commercial activity much of which has been bolstered by the influx of foreign companies attracted by the low operating costs, a relatively low cost of living and a well-educated population.

'Pearl of the Danube'

Determined to maintain its number one position in Central Europe, the government introduced the National Development Plan, a new medium-term economic policy program aiming to boost the economy by providing about €4 billion between 2004 and 2006 for the development of economic competitiveness, human resources, environmental protection and infrastructure, agriculture and countryside.

“Pearl of the Danube”, is made up of 23 municipalities, but geographically divided by the mighty river into 2 regions, Buda and Pest. Pest is the city's financial, administrative, commercial and retail core whilst Buda is favored for residential living. Tourism has boomed in recent years with the advent of budget flights direct from the UK (Wizz Air, Ryan Air, Easyjet and Jet2) and Budapest airport alone served 8.3 million foreign visitors in 2006.

As Caroline Hollingworth, of UK-based overseas property specialists, Hollingworth & Associates, comments, “Budapest is an ideal city break. There’s history, culture, great shopping and buzzing nightlife. One of the main attractions for culture vultures is Budapest’s State Opera House, which dates back to 1884 or for those in search of a bit of rejuvenation, one of Budapest’s highlights is indulging in one of its many thermal spas such as the Gellert baths.”

This influx of tourism and foreign nationals has meant that Hungary has experienced unprecedented growth in property demand and hence values in recent years.

Typical levels of appreciation for properties in well-located areas have seen increases of 10-15% per annum, coupled with an average rental yield of 6-8% for apartments. Central Budapest saw the highest increases of 50% between 2004 and 2005 in some parts however this has not proved to be sustainable.

Budapest ‘flourishing’

Caroline continued:  “The areas now flourishing are Budapest’s suburbs. As various stretches of the city’s equivalent of the M25, the new M0 are completed, accessibility into central Budapest for districts slightly outside of the main city has become a whole lot easier, generating greater demand and pushing up property prices.

Districts such as 16,18 and 21 offer young families and couples affordable, modern accommodation in quieter locations away from the hubbub of city life but close enough to central business districts to make commuting convenient and budget-friendly.”

“Politically and economically, Hungary is light years away from its former Communist doctrines. It is a stable and transparent system that moves in line with EU policy. The government is committed to a cost efficient state, credibility, predictability and transparency, which are all vital signs of stability for investors”

 “Through these attitudes and actions I believe that Hungary will remain an attractive target for foreign investors. The Budapest suburban market has a long way to go yet as infrastructure develops,” Caroline comments.  

Reasons to invest in Hungary:

  • Hungary is one of the fastest growing, fully-functioning market economies in Eastern Europe.

  • Since the end of the Communist era, Hungary has attracted $24.4 billion Foreign Direct Investment.

  • Productivity in Hungary has risen by an average of 13% every year.

  • Hungary was the first Eastern European country to join the World Bank and the IMF. It was also the first Eastern European country to sign up for NATO and the first Eastern European country to join to apply for EU membership.

  • Hungary's accession to the EU has given its economy an even greater boost and has had a very positive effect on property prices.

  • Budget airlines operate daily services to Budapest and Ryanair have just started new cheap flights to the increasingly popular Lake Balaton.

  • Stricter EU regulations will be enforced in the Hungarian property market leading to greater stability.

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