The State of Hungary's Real Estate Market

Over the past few years, Hungary's housing market has climbed to the top of the rankings of countries where foreign nationals prefer to buy real estate. And this trend has a reasonable explanation.

First, apartment prices in Budapest are 20% lower than in Lisbon and Madrid. And second, over the past couple of years, prices for residential property in Hungary have risen by 40%.

We help clients obtain a Hungarian residence permit - you can review the program terms via the link.

Below we discuss whether it's worth investing in residential property in Hungary, and cover the main advantages of such deals.

Advantages of buying property in Hungary

The vast majority of foreign investors buy property in this country in order to obtain a residence permit. Today, foreigners who buy residential or commercial property worth from EUR 155,000 acquire official status.

To participate in this route to a Hungarian residence permit, a foreigner needs to confirm the legal origin of their income and prove that the savings in their accounts will cover the minimum daily living costs, as well as be sufficient to pay all fees and state duties associated with the transaction.

The investor's bank account must hold at least EUR 27,000 plus the value of the property and associated fees. This amount applies if only the main investor is listed in the application for official status. For each additional family member, another EUR 16,000 must be added.

Additional advantages of buying property in Hungary include:

• steady growth in prices for residential properties: since 2015, apartment prices have on average risen 2.5-fold;
• the possibility of earning income from renting out an apartment: in 2022, rents rose by an average of 18%;
• buying a residential property with a mortgage: Hungary is one of the few European countries that allows foreign investors to buy housing with a mortgage (the average interest rate ranges from 8 to 10%).

It's important to note that property owners applying for a residence permit have the right to earn income outside the country. Income confirming financial independence can include income from remote employment, dividends, freelance income, and even a pension.

Real estate market trends

As mentioned, the cost of residential property in Hungary increases every year. Today the average price per square meter stands at EUR 2,400.

This figure depends directly on the location of the apartment. The most expensive property is, of course, in Budapest. New-build apartments here can be bought for an average of EUR 2,900.

In tourist areas, the price is much higher: for example, apartments located in Belvaros-Lipotvaros start from EUR 5,000 per square meter.

In cities farther from the country's center, the price per square meter drops to an average of EUR 1,700-2,400. For example, in Siofok this figure is EUR 2,300, and in Szekesfehervar - EUR 1,710.

Secondary-market property is a more financially accessible investment option. Housing in this category costs EUR 1,100-2,200 per square meter. But the secondary market has its own nuances and particularities that only specialists know well.

Primary-market properties of 60 sq m or more are in high demand. These are typically residential complexes located in well-maintained neighborhoods and fitted out to modern standards for external and internal infrastructure.

The home-buying process

The process of buying residential property can conditionally be divided into seven main stages:

1. Reviewing current listings. At this stage, the investor needs to decide on the list of requirements for the residential property and, based on these conclusions, choose a few of the most suitable options.
2. Choosing the investment property. Ideally, of course, the buyer needs to see the apartment in person. However, if for any reason they cannot come to Hungary, the specialist supporting the property purchase will provide detailed photo and video reports on the chosen property online.
3. Signing a preliminary agreement and making a down payment. The preliminary agreement should only be signed after the person supporting the deal has checked the legal cleanliness of the property. This agreement specifies the following information:

• the apartment's technical specifications;
• its exact address;
• the price;
• the rights and obligations of the parties;
• liability for failure to meet contractual obligations.

After signing the preliminary agreement, the buyer transfers 10% of the property's value to the seller. If the investor decides to cancel the purchase, the money paid as a deposit is not refunded.

1. Obtaining purchase approval. Approval is granted by the country's Land Registry Office. The decision typically takes 2 to 4 weeks.
2. Completing final settlement with the seller. The remaining 90% of the property's value is transferred to the seller's account once the Land Registry Office approves the deal.
3. Registering ownership. To obtain the document confirming ownership, you don't need to come to Hungary in person. This process can be handled by the lawyer or attorney supporting the deal.
4. Paying the tax. Within three months of completing the deal, the investor must pay 4% of the value of the purchased property to the state budget.

Taxes and fees

Buyers of residential property in Hungary pay a property-transfer tax. It depends on the price of the apartment: for properties worth up to EUR 2.6 million, you need to pay 4% of the deal amount, and for more expensive properties - 2%.

When buying a new-build apartment, the investor will need to pay 27% VAT as tax. However, in most cases this amount is already included in the price of the home.

You should also factor in administrative fees that need to be paid when completing the deal:

• the fee for obtaining approval to complete the deal ranges from EUR 170 to EUR 200;
• reserving the property (placing a veto on its sale) costs EUR 60;
• a land registry extract costs EUR 30;
• issuing the owner's title document costs EUR 22.

If a specialized lawyer represents the foreign national's interests, the amount of investment expenses increases by the cost of their services. In most cases, specialists in this category charge from 5% of the price of the residential property being purchased, depending on the complexity of the deal.

Ownership and maintenance costs

The investor's expenses are not limited to the price of the apartment, taxes and fees. Owners of residential properties also have to pay monthly utility bills (for an apartment of 85 sq m, you'll typically pay from EUR 100 to EUR 230 a month).

Property tax also has to be paid annually. The amount of this payment depends on the legal requirements in force in the specific municipality.

If you buy an apartment with a mortgage, insurance-related payments are added to the main volume of expenses.

Taxes on sale

When selling a property, the owner also pays taxes. The tax base in this case is calculated based on the difference between the expenses associated with buying the particular apartment and the income received from its sale.

The starting tax rate on sale is 15%. If the property has been owned for more than 5 years, no tax needs to be paid.

Rights and obligations of foreigners when buying property

Foreign nationals can buy any real estate except properties classified as architectural monuments. When it comes to land plots, agricultural land also cannot be the subject of a deal.

Foreigners who decide to buy property in Hungary must fulfill their obligations to pay utility bills and taxes on time.

It's also worth noting that for the duration of the residence permit, the investor cannot sell or rent out the residential property they own. Registering people not listed in the official-status application at the address is also not allowed.

Buying property in Hungary is one of the routes available to Russians for obtaining a European residence permit. It is a complex procedure that requires a solid understanding of current legal rules.