Real estate in Budapest – what are buyers looking for

With Budapest’s real estate market showing no signs of fatigue, Hungarian and foreign investors are flocking to the city to reap from its lucrative investments opportunities. This latest focus put on real estate in Budapest resulted in a change in the preferences of foreign investors. According to recent statistics taken late 2015, properties between 50 and 75 m2 are most in demand, with selling price of between 400.000ft per sqm for classical properties and up to 900.000ft per sqm for newly built properties which are located in the more central parts of the city.

 

Market prices of Real estate in Budapest:

Accumulated data is showing that a majority of foreign investors spent around 37 million HUF on a property located in the 5,6,7, 8, 9 or 13 districts, which has 2 or 3 bedrooms (or that can be divided to 2 separated apartments). This price does not reflect legal fees, real estate agency commissions, furnishing and renovation of the property. This price range indicates one of the cheapest property prices in Europe, which when taken into account together with the strategical geographical advantages of Budapest, located just in the centre of Europe, and its popularity with international students, expats, tourists and real-estate investors, positions Budapest as a prime location for investments, especially as property prices in Hungary are constantly on the rise.

 

Investors’ preferences:

The main reason apartments between 50-75 m2 are considered to be the most popular investments, is that these type of apartments are likely to be sold relatively quickly, or alternatively – can be divided to a 2 or 3 smaller units within the same property (and in some cases even to 2 different apartments) and then rented either for long term periods for international students and expats living in Budapest, or for short term daily rentals via airbnb or specialized short term rental agencies, thus maximizing the potential yield of the property. One of the more recent preferences of foreign investors in Budapest is letting the property to international students throughout September – June, and then renting the property as a short term vacation property between July and August, capitalizing from both opportunities of renting the flat for long and short term.

An increasingly common example of how investors maximize their yield from real estate in Budapest can be found in the recent “split apartments” trend. It is an increasingly common practice for investors to buy a dilapidated property which is centrally located in areas popular with tourists, and then renovate it as a split two units property. These kinds of accommodations is sought after in the city by many tourists opting for residing in apartments rather than in hotels, and are willing to pay around €35- €75 per night. The meaning for the investor is benefiting from both the appreciation of the property in the long run, and very high yields, which may even get to 20%, in the more immediate future.

 

Budapest’s real-estate hotspots

For foreign investors looking for the short term buy-to-let investments, central Budapest is the focus of their interest. Budapest is one of the most toured destinations in Europe, and tourists from Western Europe come en masse during most of the year to enjoy the many sightseeing attractions and vivid nightlife of the city. However, these tourists usually look for accommodation in the most central parts of the city, mainly in the adjacent areas of districts 5, 6, and 7, with a small part of the 5th district which is located in the vicinity of szent istván Bazilika being the most popular. This of course affected (and still affecting) the real estate market in Budapest, causing a price surge of close to 20% in property prices over a short span of less than 2 years. Just remember that investors letting their properties for short-term require to register the property as such with the municipality.

It is important to notice that besides this option of short term rent investments, real estate in Budapest is rated very high in the top 35 European cities for long term investments as well, with average prices per sqm raging about half the price per sqm in the neighboring capitals Prague or Warsaw, and 17 times lower than in London, so when comparing with other cities in the region, analytic forecast is pretty much certain of the positive trend in the appreciation of property prices in Budapest in the long term and embrace it as an investment strategy.

 

Investors’ profiles

The recent interest in real estate investments in Budapest by foreign buyers is mainly led by Russia, Chinese, Israeli, and Ukrainian investors. There’s s a large number of Chinese investors buying properties partly in order to benefit from the government’s Hungarian residency bond program, which is aimed exclusively at Chinese nationals and providing them with a way to access more easily to the EU. In a nutshell – with a minimum bond purchase, and a shortened process of gaining permanent residency, Chinese national can participate in this program and get their permit in 6 months, in contrast to the standard 5 years waiting period required in other EU countries which are part of the Schengen agreement.

 

Location, location, location!

Interviews held with real estate consultants from prominent estate agencies in Budapest help paint the map of preferred locations by foreign investors.

The 5th district (and especially, it’s most central part called Lipótváros) is without a doubt the most sought after location for accommodation, and the most expensive one in Pest. Popular with upscale expatriates, tourists, and international students, this area is home to some of Budapest’s most noticeable landmarks, including the Houses of Parliament, St. Stephen’s Basilica, Széchenyi Chain Bridge, szabadság tér, and many more.

Real estate prices in this area soared over the last couple of years and properties within this area are sold at an avg. of 700.000ft per sqm, and reaching up to 1,000,000ft per sqm for apartments with a view to the Danube. In addition, luxury one-two bedroom apartments near the Bazilika or near the American embassy at szabadság tér are already offered with price tags of more than €350.000.

The 6th district (Terézváros) in Budapest is mainly known for its long, wide and leafy boulevards, the most famous of which is Andrássy avenue, home to the most luxurious fashion shops and partly responsible for nicknaming this district “Paris of the East”. Some of the landmarks located within this the 6th district’s border are Heroes Square, the Museum of Fine Arts, and the Hungarian State Opera House. This area is very popular with expatriates and diplomats, as although in the heart of the city, the atmosphere along the wide boulevards is a bit less hectic.

The 7th district (Erzsébetváros) has seen major gentrification over recent years and has been transformed into a trendy cultural hub, with many galleries, cafés, ruin bars and performance spaces. It is most popular with young students from all over the world, giving it a unique cosmopolitan feeling.

 

What experts say about the future of real estate in Budapest?

There are a limited number of new constructions starting these days, with an expected completion date in end 2018. Those new buildings will be using some of the last empty lots in the city centre, meaning that the focus will shift to renovation of classical buildings and roof-top projects. This limit in available land resources will create in the long run a shortage in supply, which experts believe will lead to another steep increase in prices and in interest from foreign investors, which will also raise capital value substantially.

As seen with other countries that have joined the European Union, property prices are expected to rise. On top of that, as prices of real estate in Budapest are still significantly lower than in other cities, while on the other hand – Budapest is considered a much more touristic destination as well as more popular with both expatriates and students, prices are expected to soar substantially.

 

Should you invest in real estate in Budapest?

If you’re looking for a real estate investment in Europe, in a market which is strategically located in the centre of the continent, that have shown steady growth and stability since its recovery from the credit crunch, and most importantly – a market which is extremely popular with tourists, expatriates, international students and upscale tenants, then Budapest is definitely a smart investment option.

With prices currently lower than in other cities in this caliber; with rental prices soaring, and land reserves for construction depleted, analysis and forecasts by all experts foresee real estate prices continue to rise.

Combining both strategies of short term rentals with long term property appreciation will benefit investors with both a solid investment and a high yield. Just remember that if your purchase strategy is primarily based on short term buy-to-let, then the location of the property is the most important factor to consider.

We recommend reading our other useful articles which are published here in order to cover more topics and gain some tips and tools that will help you find the right property for you and the correct market price for it.

Landlords and investors are welcome to contact us with their requests or questions, our multilingual team of experts is always glad to assist with any inquiry you may have regarding buying or selling real estate in Budapest.

 

 

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