We normally ask ourselves: how can we invest in the real estate business? Or, is it a safe investment? Well, these are valid questions that need proper answers – after all, no one wants to see his/her investment go down the drain. Now, the European real estate market is considered to be one of the best in the entire planet, such that even during the turbulent times of economic recession, you will find investors looking to buy properties with the hope of things getting better. Year after year, despite several challenges here and there, the property business keeps generating more profit. However, the situation varies from country to country. If you were to ask property investors individually, they would tell you that some of the emerging European capitals are doing way better and are more profitable than the traditional cities such as Paris and London. And frankly, they may have a point.
Let’s focus on one of the underestimated cities in Europe, Budapest. Since 2014, property prices in the Hungarian capital has been increasing year after year. For instance, from 2017 to 2019, the prices increased by 35 percent, and as head into the future, market forecasts promise to continue increasing. What’s more, during the global financial crisis in 2008, Budapest remained as one of the cheapest cities. And after the economic recession blew over and real estate investors were looking to broaden their areas of interest, Budapest was at the center of the attention and media coverage.
Many consider 2014 to be the turning point for the real estate sector in Hungary. Loose monetary policy restrictions, combined with super strong macroeconomic performance has contributed to the growth of the housing industry in the country. In 2015, the capital of Hungary was ranked as Eastern Europe’s most attractive city. Because of these reasons and many others, Budapest has seen a great influx of foreign capital in the real estate sector. And when there was an upheaval of rental prices in other European cities, the prices in Budapest were still lower, which gave way to huge property investment returns. It was during this time when real estate investors compared Budapest to other European cities, where they figured out that the property rental fees were more attractive in Budapest.
Not only do new investors enjoy several favorable conditions, but those who bought property before the financial crisis in 2008 are enjoying it even more. After the crisis, there are so many people who expected foreign property investors to sell their properties in Budapest, only for reality to prove them otherwise. According to research done by Tower International – which is one of the biggest property management company in Budapest – investors who sold their properties was around 20 percent only. This finding was confirmed by several other property companies, including ManageRent Property Management Firm and EuroCenter properties. So, this means that there was no massive sale of properties as many people thought there would.
Something else that attracts investors to Budapest is the diversification of nationalities. A good number of property investors in Budapest are foreigners from different countries. The reason why foreign investors come to Budapest in large numbers is that they see great potential in the country’s real estate market. Also, based on the increase in housing prices in recent years, we can comfortably say that foreign real estate investors are pretty satisfied with the changes in the market. This is reiterated by the fact that the current prices have already exceeded the pre-crisis housing prices, which is proof that the market has been thriving ever since. Both local and foreign investors have been very active in the real estate market in recent years, thereby contributing to the growth experienced in the market in Budapest.
Rental apartments in Hungary, particularly Budapest has proved to be the most lucrative investment of all. The reason being, the current Hungarian higher education system has attracted a lot of students, both foreign and local. For instance, in 2019, the number of students studying in the country was estimated to be around 330000, where 300000 were Hungarian students and 30000 were foreign students, and most of these students were schooling in Budapest. The fact is, all these students, local and foreign, are looking for a place to stay in the city; in real estate, you would say that there are over 300000 tenants looking for places to rent.
Studio apartments still remain to be the most sought rentals by students in Budapest. The rental prices for these apartments have increased in recent years, where the average price for a studio apartment in Budapest is now somewhere between 350 and 500 euros depending on the quality and location of the apartment. Even though the most valuable apartments are in the immediate vicinity of the schools, most students prefer the ones in the 5th, 6th and 7th districts.
When compared to Hungarian students, the solvency of foreign students is pretty high. And frankly, the presence of foreign students in the country not only benefits the educational institutions but the real estate market and the economy too. The majority of the students live in rented flats, which is good news for investors in the city. According to research conducted in three universities – University of Pecs, University of Szeged and the University of Debrecen – foreign students spend over 22 billion forints on entertainment, housing, and living, plus tuition fees which are estimated to be 21 billion. Investors are aware of these facts, and that’s why they have been flooding the real estate market in Budapest, trying to capitalize on this amazing opportunity.
Additionally, the culture in Budapest also attracts property investors from all over the world. For instance, the price of tickets for the ballet or opera is only a fraction of other European cities. For this reason, people come to Budapest just to indulge in the top quality performances during the winter.
In conclusion, Budapest is an exciting, safe and fun place to invest, and with everything the city offers, it won’t be surprising to see the number of foreign investors increasing even more in the future.