Apartment selling and buying fees in Budapest
Budapest, and Hungary in general, is getting increasingly popular with both professional and first time investors looking into buying real estate for investment purposes. As a result, from year to year the volume of real-estate transactions in Budapest increases. When moving forward with buying a property in Hungary, one should take into consideration the taxes and fees related to such transactions – whether when buying or selling the property.
Buying property in Hungary might seem scary at first, for all the long procedures, countless laws and policies you need to know about, but nowadays it is a very good decision to invest our money in apartments, because the real-estate market in Hungary is booming, the prices are still quite low, but are expected to rise in the next years, meaning that by buying an apartment now, we can reach high yields. One of the factors contributing to this real estate booming is that Budapest and Hungary is getting very popular among international students and expats, who like to rent out nice, modern and centrally located apartments, which means that renting out apartments is really easy and the investment can bring back the money very soon. Before buying the apartment it is important to calculate how much it will actually cost, to help with this we collected the fees and taxes paid by the buyer and the seller.
In the case of selling the real estate it does not matter is the seller is Hungarian or foreigner, the laws and policies are the same for everyone. After selling the property we might need to pay personal income tax in the case we bought the property within the last five years, and the selling price is higher than the purchase price. The personal income tax is currently 15% in every case, but the tax base can vary. The tax base is the revenue from our property, so the difference of the selling and the purchase price. The tax base can be reduced with the costs of the apartment, such as the cost of renovation, agency and lawyer fees. If the property was bought by the seller more than 5 years ago, then they do not need to pay taxes, if it was bought within five years, the tax base needs to be calculated according the following table, and the 15% income tax must be paid accordingly:
|Year the property was bought||Tax base –
Percentage of the revenue
|Year of the purchase||100%|
According to this table if our revenue is 10 million HUF, so the tax base is 10 million HUF after all the cost reduction, we need to pay the personal income tax as follows:
If the owner sells the property in the first two years then the payable personal income tax is 1 500 000 HUF, after 2 years 1 350 000 HUF, after 3 years 900 000 HUF, after 4 years 450 000 HUF and from the 5th year there is no payable income tax.
The other fee the seller needs to pay in the case of selling a property is the real estate agency’s fee, which is usually 3-6% of the purchase price. A lot of home owners are hesitant towards real estate agents, because they believe it is just unnecessary extra cost, but as stated earlier the fee can reduce the tax base, and usually real estate agents can help finding the right new owners and selling the property much faster. If you are looking for a good and reliable agent, our multilingual agency is happy to help you with buying or selling your property in Hungary.
In case of buying property in Hungary there are more things to take under consideration. Different laws apply to Hungarians and foreigners, such as, if a foreigner who is not a citizen of the EU, the EEA or Switzerland, and doesn’t have double citizenship with these countries, then they need to submit a form to have permission from the local authorities to buy property in Hungary. The fee of the permission is HUF 50 000 per property. It is only bureaucratic process when they search if selling the property to a foreigner does not do any harm to the local authorities and interests. After submitting the form, the permission should arrive within 30 days, if all the data and information were filled correctly. Since this permission is obligatory it is very important to fil out all the paperwork correctly. It is worth talking to a bookkeeper or ask a real estate agent to help with the process, so there is no delay.
When buying property in Hungary, stamp duty must be paid to the authorities, which is 4% of the purchase price, meaning HUF 400.000 must be paid if the apartment costs 10 million, and HUF 800.000 if it is HUF 20 million. The payable stamp duty is maximum 200 million HUF, and if the purchase price is more than 1 billion HUF, than the stamp duty for the part above 1 billion is only 2%. The authorities provide a lot of possibilities for stamp duty reduction that Hungarians and foreigners are equally entitled for. It is worth the time to look them up, here you can read some examples. For a full list and further details turn to your bookkeeper or real estate agent who will be able to help you.
There is no obligation to pay stamp duty if the value of the apartment is less, than the apartment sold within the same year. If the apartment’s value is more, we only need to pay the 4% stamp duty after the difference. There is no payable stamp duty if the purchase was made between spouses or close relatives. Only 2% is payable if the buyer is under 35 year old, it is their first property purchase and the purchase price is less than HUF 15 million. Those who are buying their first apartment can apply to pay the stamp duty in 12 instalments without extra fee. In the case of buying a new apartment from the constructor there is no duty up to 15 million HUF, above which is 4%. If we are to build a new house, we don’t need to pay the stamp duty after the lot if we will build the house within 4 years. A special exemption for stamp duty is when we rent out the apartment for the old owner and the rent is no more than the 7% of the purchase price per year, so our revenue is maximum 7%; in this case we don’t need to pay any stamp duty. When the property was acquired as a gift, the stamp duty is 9% of the property’s value.
In Hungary during property purchase it is mandatory to have a lawyer. The lawyer represents both sides, but the buyer pays the fee, which is usually about 0.5-2% of the purchase price. It is very important to choose a lawyer who we completely trust and whose specialty is property law, so all papers and contracts will be prompt.
To make sure that the property we are looking at is unencumbered, we need to take a copy of the Title Deed from the Hungarian Lang Registry Office. It is usually done by our lawyer, who has the possibility to obtain it online for HUF 3600, or on paper that costs HUF 6250. All the necessary information about the property, such as the owners, any loans or mortgage can be found on the Title Deed. To have the purchase registered on our name we need to initiate the transfer of the title of the property at the Land Registry Office, which costs HUF 6600.
Now that we saw all the costs and fees that needs to be paid when selling or purchasing a property in Hungary, it is clear that they are not too complicated, but it is worth to talk to a bookkeeper to know about all the exemptions and policies, so we can see if investing our money in a property is the right decision for us. Buying property is a big decision, we need to make sure we understand all the steps we need to take in order to have a smooth process, but as we saw above it is not as complicated as it seems at first sight, and all the different policies and fees should not scare us away from buying an apartment, because if we are sure and we buy the property that is right for us, at the right place and right time it will be a great accomplishment not just financially, but personally as well.
I hope this short summery will help understanding all details about selling or buying a property, and can give a little insight in the amazing world of the real estate market.