Follow these simple steps and that ideal property in Hungary will be yours.
1. Research the market
Before you fly out to Hungary, spend plenty of time researching the market online. Go through all of the information in the Hungary section of this site and then start looking for developers, agents or individual properties that look as if they might be interesting.
The Hungary Listings section of the site is probably the best place to start your search, but also check out the advertising in this section, and look at the Directory to get some more contacts.
If you are looking for a bargain, then think about subscribing to our weekly newsletter that gives details of selected properties that we think represent good value – these listings aren’t usually advertised to foreigners. Click here for more information on subscribing.
2. Arrange Your Financing (Optional)
Although it is possible to arrange financing in Hungary through a Hungarian bank, you will probably find it a lot easier to obtain financing in your home country, perhaps by re-mortgaging your current property or properties. Another option is to discuss the possibilities with a mortgage broker who is based in your home country and has experience of arranging mortgages on property overseas.
It is advisable to do this before heading out to Hungary so that you have a firm idea as to what your maximum budget is going to be. If you spend all your time over there looking at properties around EUR150,000 and then come back and find that the maximum amount you are able to finance is EUR100,000, your time will have been wasted.
Also, it’s recommended that you talk to an accountant about the best way of purchasing an overseas property in advance so that you minimize your tax liability.
You can find details of potential sources of finance in your home country in the International Directory section of the site.
3. View the Properties
Use the Budget Flights Tool to work out the most affordable way of getting to Hungary and then head out there to look at those properties that look most interesting for you. Check the properties, or the locations if you are looking at an off-plan property. Don’t just check the properties themselves; check out the areas that they are located in as they will all be new to you. Ask plenty of questions.
What kind of tenants are you expecting to work with? If you are looking for short-term tenants (i.e. tourists), then you are going to need something very close to the centre. Are there some good hotels close to the property? If so, you’re looking in the right place. If you are looking for long-term rentals, then make sure that it is in a desirable part of the city, if not the centre. Ask yourself the question, “would I like to live here?” If the answer is no, then chances are that the up-market tenants you are planning on renting the property will also not be so keen.
Take your time making a final decision as to which property to go for – get as many independent opinions as you can. Remember that agents and developers are all going to be trying to sell you hard on what they have available, so don’t expect an unbiased opinion from them.
4. Hire A Lawyer
Across much of Eastern Europe, hiring a lawyer to oversee the purchasing process is ‘recommended but not obligatory’ because it is notaries that do most of the work in terms of checking title deeds and arranging the transfer of ownership. In Hungary, however, this is not the case – only lawyers create the contracts. This means that there is no real way around the situation – you are going to need a lawyer.
As it is vital that you find a lawyer who is representing your interests and your interests alone, don’t ask the real estate agent or developer to recommend one – it’s better to choose one yourself. You can find details of Hungarian Lawyers in the directory section.
One other advantage of using a lawyer is that, by giving them ‘Power of Attorney’, they will be able to sign legal documents on your behalf. This can offset some of the costs if it means your having to make one less trip to Hungary in order to complete the buying process.
You can reckon on paying around 1.5% of the total purchase price in lawyer’s fees.
5. Establish a Hungarian Company (Optional)
Hungarian law currently states that EU citizens who are not resident in Hungary are limited to buying just one property in the country. If they want to buy more than this, they must apply for permission from the mayor’s office (Onkormanyzat) and local administration office for the county (Kozigazgatasi Hivatal). While this permission is almost always given, the whole process usually takes up to 60 days. This permission is not necessary if property is purchased via a Hungarian company.
There are also other advantages to buying property through a Hungarian company. Private buyers have to pay 6% Stamp Duty on resale properties with a value over EUR16,000 or new properties over EUR120,000. Buying through a company reduces the rate to 2%. It is also possible to claim back some of the taxes involved in the purchase as well. There is also less Capital Gains Tax payable when you come to sell the property. It is best to speak to your lawyer to find out whether it would be in your best interests to form a company or not.
Forming a company will cost in the region of EUR800-1,000 in legal costs to form and EUR350-400 per year in accountants’ and filing fees. The company will also need a minimum of EUR12,000 in starting capital. This can be used towards the purchase of the property, however.
6. Finalize The Deal
Whereas in markets such as the UK, the initial price is known as an ‘asking price’, with both the buyer and seller expecting the final sale price to be somewhat lower than this, don’t expect the same in Hungary. There’s no harm in trying to negotiate a reduced price, but sellers here usually expect to get the full amount. Make sure you know exactly what costs are covered in the final selling price to avoid any nasty surprises further down the line. Typically, the seller should be responsible for paying 25% VAT (payable on new builds only – there is no VAT payable on sales by private individuals) and usually the estate agent’s commission (which is probably going to be in the region of 5% of the total). Sometimes, however, the seller will try and split the commission, however, so you really do need to check this first. You, as buyer, will be responsible for all of the other buying costs as detailed below.
7. Arrange Local Financing (Optional)
If you haven’t already arranged financing in your home country, you need to arrange it locally. If you’re going to be buying off-plan, then check with the developers to see if they can recommend a local bank. If not, you’re on your own. Check out the links to Hungarian Banks in the directory section.
The process of obtaining a mortgage in Hungary from a bank is going to be similar to that in your home country. They are going to see some proof of income before committing to a loan, so make sure that you bring all of your important documents with you to a meeting with a bank. Expect to have to wait for a minimum of a week or two in order to get a final decision from the bank, perhaps longer.
8. Sign An Initial Sales-Purchase Agreement
If you’re buying an off-plan property, then perhaps the developer will require you to sign a reservation agreement before you get to this stage and ask for a small deposit, but the main document is a sales-purchase agreement (Adasveteli Szerezodes) that will be drawn up by your lawyer on your behalf. This is a formal, legally-binding contract which contains all of the key information about the agreed deal including the details of the property, the total amount payable, the deposit, penalty clauses, etc. As with all contracts in Hungary, this will need to be signed in front of a notary. Typically, your lawyer will have from one to three months to complete property checks before preparation and signature of the final contract.
Immediately that the agreement is signed, the buyer will pay a deposit – usually around 10% to the seller.
9. Inspection Period
While your lawyer is checking the status of the property, you will now have a certain amount of time to inspect the property. It is not so common in Hungary to request for a surveyor to make a full structural report on a property. If the property has been built recently, then a survey should not be necessary as the building will be under guarantee from the builders. Check the property out yourself. Chances are that it will be OK, but if you see anything that could cause you sleepless nights, then perhaps it is worth the money to get the property checked out first.
You can find details of Hungarian Surveyors in the directory section.
During this time, you should also be arranging the final financing deal with your bank or mortgage broker so that all of the funds are available at the time of completion.
The final contract is signed once your lawyer has carried out all of the necessary checks and searches by checking the Land Registry Office (Teruleti Foldhivatel) which shows the ownership of all property in the country and the seller has provided all of the relevant title documents,
As always, your signatures will have to be notarized. The cost of notary fees is quite small compared to other Eastern European territories, however – as low as EUR20.
Other fees payable during the buying process include an application fee for the purchasing permit, which costs EUR250, plus Stamp Duty.
Stamp Duty is calculated in the following way for private buyers:
If you are buying property through a Hungarian company, corporate Stamp Duty is charged at a flat rate of 2%.
For resale property – 2% of the total purchase price on the first EUR16,000 and 6% on the additional amount.
For new-build property – 0% of the total purchase price on the first EUR120,000 and 6% on the additional amount.
Garages and storage are different – they are charged a flat rate of 10%.
And naturally you are also going to have to pay the balance of the cost of the property itself. Usually this is paid via your lawyer who keeps the money in an escrow account until you are officially listed on the Land Register, a process that can take up to six months. You won’t have to actually wait that long to get access to the property, however – normally the money is transferred and you get the keys to the property while the paperwork goes through the legal process.
Congratulations! You’ve just bought yourself a property in Hungary! That wasn’t so difficult now, was it?!