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bne May 2018 Special report I 35
The volume of sales for existing prop- erty in Hungary is dozens of times more than for new-builds. During the first three quarters of 2017 92,400 residen- tial facilities were sold in the existing property market, compared to 2,900
for home loans as of the second quarter of last year in Hungary is, according
to Statista, 3.44%, whereas in 2013 it exceeded 11%. According to Balogh, cheap mortgages are also stimulating price growth.
as inhabitants of small localities move to cities in search of employment.
In particular, the growing number of inter- national students in the country is raising the demand for rental property. Accord- ing to Daily News Hungary, this number was 28,000 in 2017 and is expected to increase to 40,000 by 2023. At the same time, Hungary’s popularity among tourists is growing. In Q3 2017 the Hungarian Central Statistical Office recorded 18.7mn international arrivals, which is 5% more than during the same period 2016.
“It is relatively easy for a foreign national to buy Hungarian property. The pay- ment is done in stages. First, the buyer puts down a deposit of about 1% of the property price, proving the seriousness of his/her intention. The buyer pays another 10–15% during the execution of the sales agreement. The local municipal authority must approve the purchase, which takes 6 to 8 weeks. After that
the remaining amount must be paid. Buying expenses constitute 5-6%,
which includes the legal service charge (1–1.5%) and the purchase tax. After this is paid, the transaction is registered with the Land Registry. In Hungary, sell- ers pay the realtor's fee,” said Opalyuk.
"The 2008 global economic crisis had a negative effect on Hungarian property prices"
new-build. Over the past decade, more new-builds have been entering the Hungarian property market than have been sold, except for 2015, when 3,100 units were built and 3,400 were sold.
In 2017, 38,000 construction units were issued, which is 20% more than in 2016, 14,600 of them in Budapest, according to official figures.
Incentives for market development
Since January 1, 2016, a reduced VAT rate of 5% instead of 27% has been applied
to new-build property sales. This has encouraged the demand for newly built residential property. In 2016, 44% more newly built residential units were sold compared to 2015. This, in turn, partly maintains price growth – new-builds were 7.6% more expensive in 2016 year-on-year and have risen in price by another 7.8% over the first three quarters of 2017.
“However, cutting VAT is just a tempo- rary measure. The Hungarian govern- ment plans on returning to the old rate of 27% on January 1, 2020. Analysts believe this would lead to a price increase of at least 20%,” says Inna Opal- yuk, who is Real Estate Sales Manager for Hungary and Slovenia at Tranio.
According to Laszlo Balogh, the leading expert from property website ingatlan. com, property prices in Hungary are growing faster than locals can afford, which is causing the demand for loans and cheap property to grow. The total amount of residential loans issued in the first half of 2017 was €930mn, one-third larger than during the same period in 2016. Moreover, two of every three home loans are used to buy exist- ing property. The average interest rate
The Hungarian government is raising energy performance requirements for buildings, making construction more expensive for developers. In 2017, the amount developers spent on construc- tion was 1.5 times higher than in 2015, and by 2020 costs will rise by another 40%. In contrast, construction expenses rose by 5.2% in comparison to 2016, according to the Hungarian Central Statistical Office.
Hungarian apartments may be an attrac- tive investment for those who plan to rent them out. Although the number of Hungarians renting residential property is small, it is growing gradually (from 3.6% to 5.2% between 2011 and 2017)
Hungarian residential property sales and construction, thousand units
Source: Hungarian Central Statistical Office
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