Why Hungary, you ask?
Well, for starters, it's not just about goulash and thermal baths (although those are pretty awesome too). Hungary has been turning heads in the global investment game for some solid reasons.
1. Central Europe's Sweet Spot
Situated right in the heart of Central Europe, Hungary is like the cool kid at the international party. With its strategic location, skilled workforce, and operational costs that won't make your wallet cry, it's got that unique charm.
2. EU Membership Magic
Being part of the European Union is like having a golden ticket. It opens up a world of opportunities, and Hungary is proudly waving that ticket. EU perks, anyone?
3. Tax Treats and Residency Perks
Now, here's the juicy part. Hungary rolls out the red carpet for investors with tempting incentives. Think super low property rental taxes (we'll spill the deets later) and residency programs for our non-EU pals. It's basically an invitation to join the Hungarian adventure!
4. Budapest: Where Dreams Take Flight
Picture this – Budapest, the dynamic capital, is not just a city; it's a vibe. The startup scene is buzzing, tech companies are thriving, and the atmosphere is nothing short of electric. But wait, there's more! The historic city center is like a living postcard, boasting iconic attractions that make every day an adventure.
Choosing the right location
Whether you're aiming to attract renters or buyers, the key to success lies in choosing the ideal spot that resonates with your target market. And if Budapest is on your relocation radar, we've got some valuable insights just for you.
1. Life and Entertainment: Districts 5, 6, and 7
If you're a single resident or looking to cater to this lively demographic, set your sights on Districts 5, 6, and 7. These districts pulsate with life and entertainment, making them a magnet for overseas investors. District V, in particular, steals the spotlight with its iconic parliament, St. Stephen’s Basilica, and a plethora of eateries. Dive deeper into the charm of District V with our earlier guide.
2. Central Revitalization: Districts 8 and 9
Investors, take note! Districts 8 and 9 offer central locations and have undergone significant revitalization in recent years. Properties here can be stellar investments, promising high returns. However, tread carefully – not all streets and neighborhoods within these districts are created equal. Some may be less developed and less desirable, so do your homework.
3. Family-Friendly Haven: Buda - Districts I, II, and III
For families seeking greener and more peaceful surroundings, Buda is the answer. Districts I, II, and III are top choices for international investors. District I boasts a historic charm with the Castle District, albeit with a unique twist – properties here cannot be owned outright, only leased.
Districts II and III, sprawling into Buda’s suburbs, offer a variety of options. Not only do they showcase stunning views and hiking opportunities, but they also appeal to parents due to the presence of renowned international schools. From the British International School (BISB) to the American International School of Budapest and the Gustave Eiffel French School of Budapest – these districts have education covered.
Tailoring Your Property Hunt to Suit Your Needs
Once you've locked in the perfect location, it's time to turn your attention to the nitty-gritty details that will define your ideal property. Here are some key factors to consider as you embark on this exciting journey:
1. Purchase Price: Crunching the Numbers
Undoubtedly, the purchase price is a make-or-break factor. Take a deep dive into your finances and establish a comfortable spending range. Remember, it's not just about the property's sticker price; closing costs, legal fees, and stamp duty are also part of the equation. Dive into the details of these costs in section 3 for a comprehensive understanding.
2. Layout and Size: Tailored for Your Purpose
Consider the purpose of your property. If you're targeting families, prioritize layouts with spacious, open-plan living areas, multiple bedrooms for privacy, and family-friendly kitchens. Storage is key, and a dedicated play area can sweeten the deal. For short-term rentals, focus on practicality and convenience, ensuring optimal space use and amenities that cater to a diverse audience.
3. Physical Features: Inspecting with Precision
When you've narrowed down your options, scrutinize the properties carefully. Look for any telltale signs of structural damage, like cracks in the walls or uneven floors.
4. Age of Property: Balancing Renovation Potential
Renovating can be a lucrative venture, but it requires more than just confidence. Assess the age of the property and weigh the potential returns against renovation costs. Some upgrades can significantly boost value, while others may not yield the expected returns.
5. Maintenance Costs: Knowing What Lies Ahead
The ongoing costs of homeownership vary based on the property type, lot size, and age. Condos usually come with reasonable maintenance costs. Be aware, though, that opting for a house means taking on additional responsibilities like roof maintenance and regular gardening expenses.
Key Legal Considerations
1. Eligibility for Property Purchase
Both EU and non-EU citizens can purchase property in Hungary, excluding agricultural land. EU residents enjoy the same rights and obligations as Hungarian citizens, requiring no additional approvals. Non-EU citizens need approval from Budapest’s local municipality, a formality costing around 170 EUR, or they may opt to set up a company for multiple purchases at approximately 500 EUR.
2. Cost Breakdown
Apart from the home's price, anticipate legal fees of 0.5–1.5% of the total purchase price (for preparing the purchase agreement) and 4% stamp duty. If renting out the property, be prepared for a 15% income tax on your annual rental income.
3. Bank Loans
Securing a loan from a bank in Hungary is straightforward for those with a monthly salary. Local and international banks extend loans to foreigners, typically requiring a 30-40% down payment, with the rest financed by the bank. The process may take two to three months.
4. Residence Permits
Contrary to popular belief, owning property is not mandatory for obtaining a residence permit in Hungary. Renting a flat offers the same chance for a residence permit. While having property can be advantageous for permanent residence or citizenship applications, it's not a mandatory condition.
5. Property Purchase and Residence Permits
Buying property, regardless of the amount spent, doesn't guarantee an automatic residence permit. Approval doesn't ensure immediate permanent residence, and living in Hungary is a general requirement. Leaving the country for an extended period may result in permit revocation. A temporary residence permit is the first step for all applicants.
6. Selling
Holding on to your property makes sense: after owning the property for five years there will be no capital gains tax due on any profit you make.
If you’d like to sell before the 5 years is up, then here are the tax rates you’ll need to pay. The rate of the capital gains tax is 15%, and the base of the tax is the difference between the purchase price and the selling price (so not the full value of the property!). The year zero is considered the calendar year when your purchase was completed:
You can calculate the rates using the following table:
Year Zero: 15% x 100% = 15%
1st Year: 15% x 100% = 15%
2nd Year 15% x 90% = 13.5%
3rd Year 15% x 60% = 9%
4th Year 15% x 30% = 4.5%
5th Year = 0%
Here's how we make the magic happen
Local Expertise
Our team consists of local patriots who breathe Budapest. We know the ins and outs of each district, keeping our fingers on the pulse of evolving buyer preferences. We're the insiders who know what's hot, what's in demand, and what features captivate buyers.
Detailed Analysis
Leveraging our market knowledge and advanced tools, we conduct a meticulous analysis of local market conditions, trends, and potential growth areas. From supply and demand dynamics to economic development and property appreciation rates, we've got it covered.
Rental Insights
As a rental agency, we bring hands-on experience to the table. We can precisely evaluate potential rental fees and conditions for each property, giving you a realistic picture of your investment's rental potential.
Renovation Guidance
Having tackled numerous renovations ourselves, we guide you in identifying renovation criteria that align with location and market trends. Our in-house designer, Orsolya Laasz, can pinpoint creative opportunities that add significant value to your investment.
Negotiation Mastery
Once we spot the perfect property, we don our negotiation hats to secure the best price and terms. We navigate the purchase process seamlessly, coordinating with other agents, lawyers, and professionals involved.
Post-Purchase Support
Our commitment doesn’t end with the purchase. Whether you need assistance in finding tenants, property management, or insights on potential future renovations and market changes, we've got your back.
