Oct. 31, 2016
The Pearl of the Danube – Budapest is often compared to Paris. With splendid architecture pleasing to the eye, it is a city of mild climate, coziness and warmth, which is a characteristic of small countries in eastern Europe. Hungary was not touched by the flow of migration, making it a very calm place. Despite the steady rise in prices, accommodation and commercial real estate here are less expensive than in many other European countries. In addition to that, owners of estate can readily gain Permanent Residency.
To elaborate on these and other advantages of property in Budapest for the EE24 portal, we will turn to Lidia Ivanova, who is a specialist in the foreign estate department for Hungary in the “Advecs” corporation.
The general market specification
Currently, the market of Budapest is in the phase of active development. In 2015, the prices for estate standing in the center of Budapest rose by 28%. The tendency for steady increase in price has remained.
Although new buildings are available for sale, secondary buildings in the city center are most popular. Areas number 5 and 6 are the most expensive, as well as areas near the inner circle – numbers 7, 8 and 13.
In the most expensive area, 5 - a small one-room apartment costs from €120 000 and up. Properties of same conditions, but in areas 6, 7 and 8 have a price of €60 000 - €90 000. The lowest prices (from €40 000 for a one-room flat in good condition) are fixed for the more remote regions of the city (15, 16, 17 and 20). In the city center, a flat with such specification will sell for €90 000.
Budapest also features a high demand for commercial estate – hotels, residential hotels, offices. A small hotel with 6 rooms in the city center costs around €300 000. For big hotels with a concert hall and a big restaurant, prices start at €1 million.
Profile of purchasers
More than 50% of the estate buyers in Budapest are Hungarians. Due to the crisis of the national currency, the number of Russian customers has decreased. Demand for inexpensive apartments has risen from the Ukrainian side, as Hungary borders with this country. At the present, there are also many inquiries from China, Arab countries, and several western European countries.
A popular scheme is for foreigners to buy property in Hungary in order to put it up for rent in the present, and then move there permanently after retiring. An additional advantage for purchasers aged 50 and up are numerous thermal healing reservoirs. They attract people from all over the world, who wish to improve their health.
One category of buyers that plays an important role on the estate market in Budapest are children of well-to-do parents, who came to Hungary to receive higher education. It is not without a reason that the British rating company “Times Higher Education” has listed several universities in Budapest on their rating of best education institutions (Semmelweis University of Medicine, University of Technology, University of Economics).
Sometimes wealthy students buy two- or three-room flats and let their own rooms to their classmates. In this way they significantly save on education and living costs in Budapest.
The procedure of purchase
In Hungary, all contracts related to estate are signed with the help of a lawyer. After the choice of the property is made, the advocate checks its juristic status. Afterwards he composes a buyer-seller contract and opens a special transit account for the deal. A down payment summing in 10% of the amount indicated in the contract is sent to the advocate’s transit account by the purchaser.
In the meantime, the purchaser is required to receive a permission to buy the property from the municipality (in the course of 2 months).
The contract, along with other necessary documents is filed into the Registration Office. The buyer pays 80% of the cost and a government tax (2-4%). The last 10% is settled by the new owner on the basis of the receive-relinquish act.
A real example: the costs for the formalities in finalizing a purchase of a €50 000 apartment will be a sum of €5 353.
When buying a commercial property in Hungary, it is advisable to register it for a legal person. The reason is that if a natural person acquires a commercial facility from a legal person, an obligation to pay the VAT arises.
Mortgage for foreigners
Foreign citizens may apply for mortgage loans in Hungarian banks. The main condition is possessing documents proving that the applicant has a clean source of income.
Citizens of Russia can get a mortgage in a local Sberbank with а rate of 5-6%. The granted loan will not exceed €65 000.
When buying a property, a tax varying from 2 to 4% is paid for the transferring of the right of possession - the percent value depending on the characteristics of the estate. There are no annual estate taxes in Hungary for regular buildings. Owners of prestigious property in resort cities have to pay a municipal tax every year. The highest rate of this tax is noted in Heviz (from €100 to €150).
Duty obligations arise for the seller of property if they have been in the possession of the facility for less than 5 years. The Value Added Tax for the sale of the estate amounts in 25% from the difference between the price of purchase and price of sale. The sum of the tax also depends on the period the apartment was in the owner’s possession.
A person wishing to receive permanent residency in Hungary has to first successfully apply for a D category visa in the embassy of Hungary in their country. The required documents for a D visa include a status document from the Registration office about the purchase of the estate, proof of income, medical insurance and bank account statement. The consular fee is €60.
A minimum of 8 square meters of living space is required for every family member. A medical insurance is obligatory (from €100 to €3600 yearly, depending on the type) and at least €6 000 per person yearly on the bank account (better €10 000).
Once the applicant is granted their D cat. visa, they may enter Hungary and file in the documents for permanent residency. It will be ready within 2-3 weeks. For the applicants who make the estate investment their grounds for the permanent residency, there are no requirements regarding the value of the property.
Text – Alena Eliseeva, ee24