The number of foreigners purchasing real estate in Hungary is not decreasing, which - particularly in Budapest - is mainly attributable to buyers looking for an investment.
The number of foreigners purchasing real estate in Hungary is not decreasing, which - particularly in Budapest - is mainly attributable to buyers looking for an investment. In addition to attractive prices and quality offers, however, foreign investors must often face the inflexibility of the financing system as well, Hypo Alpe-Adria Leasing (HAAL) said on Friday.
Foreigners buying real estate in Hungary - figures and trends
The Hungarian residential real estate market has lost none of its appeal as far as foreign buyers are concerned: for several years, cc. 5,000-6,000 foreign individuals have purchased real estate in Hungary annually.
Residential properties account for almost four-fifths of the total number, the rest being made up of holiday cottages - particularly around Lake Balaton - and building lots, HAAL said.
Budapest tops the sales list with over one-third of the transactions, while the most popular counties are Somogy, Bács-Kiskun (Hungary's biggest county) and Zala. In terms of nationality, German buyers were the most active in 2006, followed by Romanian, Irish and Dutch investors.
Last year almost two thousand foreign individuals purchased real estate in Budapest - 56% of the buyers came from three European countries, Ireland, the United Kingdom and Spain, HAAL said.
Note that statistics obviously do not show real estate purchases completed through companies - according to estimates, another 2,000-3,000 foreigners acquire properties in the capital this way annually.
These buyers - most of them businessmen - primarily purchased valuable, new or second-hand prime properties offered to them by foreign real estate agents and brokers for investment.
Why is Budapest attractive?
“For foreign buyers, the main appeal of Budapest lies in the fact that in comparison with the more developed capitals in the region (Prague, Warsaw or even Bratislava) we have the lowest prices on newly built homes," Zoltán Kiss, CEO of Hypo Alpe-Adria Leasing Zrt. said.
“The 35-40% price difference that exists between Warsaw and Budapest today will only decrease gradually, while for investors Budapest will obviously retain its price advantage over the large cities of Western European countries in the long term," he added.
It is another important demand driver that Budapest now also offers world-class new properties, and there are still an ample number of available properties in the fashionable Buda districts as well as in the city center.
A typical problem: inflexible, standardized financing opportunities
As with any other investment, the rate by which regional price differences can decrease greatly depends on the flexibility of the financing opportunities available. In the case of prime properties in Budapest, the typical purpose of using external funds is not to create purchasing power but to optimize the return on the investment.
Consequently, foreigners who buy real estate for long-term investment and intend to rent out these properties for income are definitely looking for providers who combine lending with sufficiently flexible and high-quality consulting activities.
The lack of trust of foreign investors - which inevitably results from their unfamiliarity with local market conditions - can (could) only be eliminated with outstanding customer service, that is, flawless communication and bilingual documentation.
The Hungarian real estate finance market has seen immense growth in the last 6-8 years, with HUF 600-800 billion worth of new home loans added annually. In such an environment, providers have obviously focused on creating standardized processes and building huge lending operations.
Consequently, the retail branches of Hungary's banks are not prepared for handling special, individual requests - this applies to both their product range and their customer services.
Companies that respond dynamically to their customers' needs, have a quick decision-making mechanism in place and employ professionals with extensive specialist knowledge - and are therefore able to meet individual requirements - are the exception and not the rule in Budapest today, HAAL added.
HAAL, which is engaged in financing prime real estate as one of its principal activities, also believes that complex services are the key to market success.
“Flexible, customized solutions are already available from the outset for foreign individuals buying real estate in Hungary," Kiss said.
“However, we must provide far more than that: we can disburse the loan required for the investment in 2-3 weeks with complete administration, irrespective of the value of the property to be purchased. Private banking-like services have also become an essential requirement in this segment - the considerable know-how accumulated by our Austrian parent company over several decades allows us to provide such services for our clients in any situation."
