Why invest in Hungary?
A few reasons why both professional and private investors like to invest their money into Hungarian real estate investments:
- Stable and investor-friendly legal framework
- Great variety of tax structures to meet maximum profit on investment
- Due to European Union and local government funds, the monumental areas of Budapest are under continuous renovation and the infrastructure is under ongoing modernisation and capacity extension
- Hungary and Budapest are strategically located in the heart of Eastern and Central Europe and operating as a commercial crossroad between East and West, with one of Europe’s most important waterways, the Danube, cutting through the country.
- With a rich and more than 1100 hundred-year-old history and culture, Hungary have a highly educated and motivated workforce and this is one of the most important reasons why major corporations choose Budapest as their regional centre.
- Budapest property prices are approximately 25% lower than those of Prague and Warsaw, and 2-3 times cheaper than prices in major western European countries.
- In September 2013, the EU approved total funding of €25 billion to be invested in Hungary by 2020 to accelerate economic growth in the country.
- Hungary aims to adopt the Euro within the next few years. This will mean lower interest rates, cheaper mortgages, more inward EU investment in the city and consequently, prices will experience a boom.
- Comparison of the average new flat prices in EUR / square metre (www.portfolio.hu October 2017)
1600-2500 EUR Budapest
4000-6000 EUR Prague
3000-4000 EUR Bucharest
2500-3500 EUR Bratislava
Best Investment Opportunities in Hungary
Several years ago, Hungary was ranked 8th on Site Selection’s list of best countries to invest in with 74 lucrative investment projects. The investment situation has been on a constant rise since and it looks bright and shiny in 2019.
HIPA (Hungarian Investment Promotion Agency), managed by the Hungarian Government and the Ministry of Foreign Affairs and Trade has also been named the best investment promotion agency in the region.
The best and biggest investment area in Hungary is real estate. Other prospective investment opportunities include establishing a company and investing in government bonds. Let’s explore the real estate market.
Investment Opportunities in Hungary – Real Estate Market in Hungary
If you’re doing business in Hungary, your company might enjoy low-interest rate loans and other perks. However, investors in Hungary can also easily obtain real estate. If you are interested in the best investment opportunities in Hungary – the country’s real estate market – keep reading for the key market facts and legal requirements.
Market Size 2019 vs. 2018
The size of the Hungarian real estate market has been on a steady rise in recent years. 2018 saw a big rise in both prices and demand as the Hungarian economy continued its recovery following the 2008 and 2015 financial crises. 154,000 contracts were signed in 2018, while the estimates for 2019 average around 160,000.
The real estate market boom, supported by the continued rise of the Hungarian economy, has carried over into 2019, as well. The prices are rising as is the demand, both in Budapest and around the country.
The period that many dubs the golden age doesn’t look like it will end soon, making this the perfect time to invest in real estate in Hungary.
Options at Your Disposal
If you want to buy real estate in Hungary, you can search on your own or through a Hungarian company dealing in real estate. Your main options include a flat in Budapest, a house in Budapest, a house in the countryside, and a place for renting. Here are a few words on each option.
The first and most expensive option is a flat in the country’s capital – Budapest. In recent years, prices of real estate in Budapest have significantly risen above the prices in other regions.
You should also know that the location of the apartment plays a big role in the price, as does the age. The average price for a square meter in Budapest is around 3000 euros.
Buying a house in Budapest can be more affordable than buying a flat. Of course, there are villas in and around the city which go for mind-boggling sums, but the majority is far more affordable. Buying a house can be a better solution if you want more peace and privacy.
Going for a house in the countryside may be an even more affordable option. However, you should be careful if you’re planning to purchase a tanya – a house that used to be a countryside farm.
If there are Hungarian bidders, they will have the advantage. Also, you won’t be able to buy a property bigger than 10,000 square meters.
Finally, you can opt to buy a property to rent it. Most investors who opt for that solution go for two apartments, while some buy even more. That way, you can live in one apartment and rent out the other(s), thus securing your income, which is the key to acquiring a residence permit.
If you have a company registered in the country, you don’t need a permit to buy real estate. This is the easiest and simplest way to get into the real estate market. That said, foreigners who don’t own Hungary-based businesses can also obtain real estate.
European Union citizens can buy property in Hungary with no restrictions. However, non-EU citizens will first need to obtain a residence permit from the Hungarian government. After that, they will need to obtain a permit to buy land. The latter can be obtained at the local district council and it costs approximately 200 euros.
When you decide on a property, it is recommended to hire a lawyer and perform structural and architectural checks of the property. This will also activate the property valuation and title search.
Once the property has been cleared, the lawyer should draft the contract. The lawyer, the seller, and the buyer have to sign the contract. A real estate office representative also needs to be present at the signing.
You should pay the 10% deposit at the signing. You also cover both the agent’s and the lawyer’s fees. Also, you will have to submit the agreement to the local land registry no more than 30 days after signing.
The process of obtaining the permission then takes another two to three months to complete. Once you get it, you should inform the seller right away. After that, you can sign the Closing Statement, a document that declares that you’ve paid the entire sum to the seller. Registration of the ownership will then take up to six months.
The entire purchase process will be overlooked by your local land registry.
If you’re a foreigner buying property in Hungary, you will need to hire an attorney who will draft your contract and who will then take it to the land registry to be verified. He or she can also help with other steps along the way.
It is also recommended to hire a real estate agent or agency. This will greatly facilitate the process and reduce the chances of you getting scammed or charged too much.
Taxes and Obligations
Here is a brief overview of taxes and obligations related to investing in real estate in Hungary.
Do You Need a Permit?
Companies set up in Hungary don’t need permits to buy a property. However, the situation’s a bit different for non-Hungarians that don’t have a registered company.
If you’re an EU citizen, you don’t need a permit either. However, non-EU citizens do need a permit to buy real estate in Hungary.
Are You Exempt from VAT or Subject to It?
Generally, you should be exempt from VAT when buying real estate in Hungary. However, there are some exceptions. If you buy a building site or a property that’s been built in the last two years, you might be subject to VAT.
If you’re buying a property that’s not considered new, the seller might opt to charge VAT. However, you can reclaim it. In 2019, the rate is 5%.
Real Estate Transfer Tax
If your company acquires real estate as part of exchange or purchase, you will have to pay the real estate transfer tax. It is 4% of the real estate’s market value. If the property is worth more than 1,000,000,000 HUF, the rate is 2%. This tax can never exceed 200,000,000 HUF for a single piece of real estate.
You might also have to pay building and land taxes to the local authorities. Depending on the decision of the local authorities, these are calculated based on either the useful space of the property or its adjusted market value.
Building tax can reach a maximum of 200 HUF per square meter a year or 3.6% of the property’s adjusted market value. The maximum land tax can be 200 HUF per square meter per year or 3% of the property’s adjusted market value.
Other Real Estate Transfer Tax Examples
Your company might also qualify for the real estate transfer tax if it obtains 75% of the shares of a Hungarian company that has more than 75% of its assets in real estate. A 4% rate will be applied.
On the other hand, if a real estate investment company does the acquisition, a 2% rate will apply.
Getting into real estate is one of the best ways to start investing in Hungary. The most popular area to invest is, of course, Budapest. However, Győr-Moson-Sopron County is rising in popularity.
If you decide to invest, hiring a professional is highly recommended. It will make the process much easier and save you a ton of time.