In recent years, the real estate market in Budapest has done exceptionally well. Property prices have substantially surpassed the pre-crisis levels alongside market recovery. Since 2007 – when the country experienced a financial crisis, the real estate market has increasingly been getting busier, every year that passes. To be specific, 2013 was the year that the re-awakening of the Budapest real estate market started, gained momentum in the following year, and has never stopped since then. The central parts of Budapest were the areas that saw a steady increase in property transactions. The reason being, investors – both foreign and local – were aiming to capitalize not only on the short term yields but also property appreciation in the long run. From a national perspective, the western region of Hungary, as well as Budapest’s more central parts, have been thriving, while the country’s eastern region has seen a lower number of property transactions.
In a research conducted in 2016, it showed that out of all the transactions from that year, 38% of those transactions were in Budapest’s residential real estate sector. This research also revealed an interesting insight that both local and foreign investors prefer to invest in the Capital, Budapest, due to the substantial amount of profit that could be realized afterward, whether long term or immediate property value increases. From this research, we realized that smaller apartments, of around 100sqm, are quite popular among real estate buyers. The reason for this is the fact that they are sold in a more efficient manner when compared to larger properties. However, even though short term rentals have increasingly gained popularity, larger classical apartments that can be divided and rented out as separated smaller vacation apartments or rooms have also increased in demand, as they give the landlords immediate high yields.
As the market continues to boom, the prices of property have made a substantial jump. Considering the superb geographical location of Budapest – in the center of Europe; and the fact that in spite of this, it’s cheaper and affordable when compared to other major European cities; and not forgetting that prior to the economic crisis in 2007, property prices had soared to imaginable levels – just within a few years - it’s no wonder foreign property investors are now – when the crisis is over – flocking the Hungarian Capital, even more than in the neighboring cities, making the prices go up substantially. The real estate market in Hungary developed in parallel to the country’s macro-economy, which has enabled a solid economic improvement and growth in the labor market. What’s more, the government’s decision to incentivize property investors to enable them to purchase more properties has increased the demand significantly, which has resulted in an increase in property prices. So, considering these reasons and also eliminating the impacts of the crisis – which affected all European markets – Hungary, Budapest real estate market in particular, has proven to be a resilient and profitable ground for real estate development companies and investors.
The residential real estate sector in Budapest has performed beyond all expectations. In recent years, the market has flourished and has been booming in all regards, and if the massive number of transactions witnessed - from local and foreign entrepreneurs, private investors and developers – is anything to go by, Budapest – which accounts for most of the country’s GDP – is still and will remain the preferred choice in the region for real estate investments.
If the above reasons don’t convince you that Budapest is the best place to buy property, how about this: property transactions in the Capital are very safe and are also super-profitable, with an average return of 6% - 8% on long term rentals, and returns that are much higher from short term rentals – which can go up to 20% if the property is suitably located in a prime location. Also, Budapest is undoubtedly one of the most attractive classical cities in Europe, and it has been like a magnet for property investors for years now, which clearly showed the level of confidence investors have in the city’s property investments. Apart from the many expatriates, students, upper-class locals and tourists residing in Budapest, the city is also the preferred investment location for retiring western Europeans and Americans who pick the city due to its lower costs of living.
For foreign property investors, the chase after yield and the return on investment is what attracts most of them to Budapest, and is also what attracts any other investor to invest abroad. For instance, the rental yield from a long term rental is around 6% in the Pest area, while in the Buda area, it is averaged at around 7%. Typically, these yields are good, very good actually. And if you are to add any possibility of short term rentals, particularly during the summer, the yield will go up to around 10% or even 20% depending on the rental arrangement and location. Moreover, the cost of living in Hungary is pretty low, especially when compared to the neighboring countries. So, if you are an investor and you need to furnish or renovate the property, everything that you will need will be priced according to the economical index in the country, which means that the cost will be much lower.
Obviously, the real estate market in Budapest has grown, expanded, and has seen a substantial rise in property prices over the last couple of years, so you can’t compare today’s prices with the prices from last year or the other year. Yet still, considering the above review and also the current trends in the property sector in the country, the prices are still expected to go up even further. So, our advice would be to invest now, this is the best time to buy some properties in Budapest. The prices will keep increasing, and the longer you continue to wait, the higher the prices will get. Also, investors are expected to keep competing for favorable opportunities in the market, which will, in turn, lead to a steeper increase in property prices. If you decide to invest, ensure that you get a real estate consultant to help you with the process, especially if you are not familiar with the Hungarian real estate market.