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Make a Profitable Property Investment in Hungary

February 27th 2024 in Europe,Residency
Make a Profitable Property Investment in Hungary

Compared to other cities, gross yields in Budapest, calculated from purchase prices and revenue from rent, are among the highest, which means the Hungarian capital is still an excellent destination for those investing in residential property. 

The new Hungarian Guest Investor Program combines property investment with a Hungarian residence permit.

In recent years, prices in the Hungarian residential property market have increased by nearly 250%, and the rise was the most significant in Budapest, the capital city. Despite this considerable price increase, the residential property market in Budapest is still a great choice for foreign investors, as Hungarian capital offers attractive prices and residence by investment opportunities compared to international opportunities.

According to data by the National Bank of Hungary , the value of apartments has significantly increased in recent years in Hungary. In the last nine years, between Q1 2014 and Q1 2023, there was a 231% increase in residential property prices, which means that the annualised yield from the value growth was over 14%. In Budapest, the price rise was even sharper than the national average. In the capital, prices per sqm shot up, and in Q1 2023 residential property cost nearly four times as much as it did in early 2014 – this increase meant a 16.4% annualised yield for property owners.

Hungarian property price trend

Foreign Investors

Foreign investors should weigh their options before investing in residential property and explore price differences and potential yields in attractive cities. For example, while the price of new residential properties in Tel Aviv in 2022 was almost EUR 15,000 per sqm, it was only about EUR 2,000 in Riga, Latvia (Read: How to Buy a Property in Latvia?). 

While there has been a significant increase in prices in recent years in Budapest, in an international context, it is still considered a relatively inexpensive city: in Budapest, Zagreb, and Warsaw, the price per sqm of new residential properties was below EUR 3,000 in 2022.

It's not only low prices that can attract investors to Hungary's capital. Gross yields, calculated from purchase prices and revenue from rent, are also among the highest.

The Hungarian Rental Housing Market

The rental housing market is experiencing excessive demand, further fueled by the low number of property transactions. Although the annual growth rate of rental fees has moderated between September 2022 (24.2% in Budapest, 22.4% nationally) and March 2023, it still remains high, with a 19% increase in Budapest and an 18% increase nationwide in the annual growth rate of rental fees for available apartments. 

Even in the suburbs of Budapest, which used to be the most affordable, the average rental fee has reached two hundred thousand forints. In the rental housing market, a state rental housing program could be helpful, as well as improvements to the outdated legislative and enforcement systems.

In addition, as in other cities abroad, services available on the Budapest market allow foreign investors to realise rental yield from their property without effort. Property management companies can deal with every aspect of apartment management, from furnishing to finding tenants to handling rent and utility fees.

The Future of Hungarian Property Market

Without a doubt, 2024 presents a compelling opportunity for property investment in Hungary, as evidenced by a combination of favorable signals that indicate a promising investment climate. Hungary's reputation for stability provides a secure foundation for investors seeking a reliable environment for their assets. 

This stability minimizes potential risks and ensures the long-term value of real estate holdings. 

Despite the remarkable increase in Hungarian property prices, Hungary's property market remains incredibly attractive. Hungary's overall cost of living is still relatively low compared to other EU countries, making it a compelling destination for local and foreign investors. 

Tourism also plays a significant role in Hungary's economy, contributing to job creation and GDP. With its breathtaking architecture, rich history, and thermal baths, Budapest is a key attraction. Other destinations such as Lake Balaton, Debrecen, and Eger also bring in substantial tourist traffic, giving investors access to the holiday let market. 

The consistent increase in Hungarian property values signifies a growing demand for real estate. This trend reflects positive market dynamics, potentially leading to capital appreciation for property investors. Moreover, the growing wealth of the Hungarian population can further fuel the demand for housing and contribute to the potential for long-term property value growth. 

While there is never a crystal ball when it comes to house price predictions, the strong historical performance and current trends of Hungary's housing market indicate that it will continue to rise—making it a great location for investment.

Summary 

The new Hungarian Guest Investor Visa will considerably increase the demand for high-value properties in this year and and for long term as well. It is the right time to act and get the best deals.