Airbnb in Budapest 2024 – Game over, or now more than ever?
The question is therefore: what exactly does it look like? And will it stay that way?
Disclaimer: I am not a lawyer or tax advisor and you should not base your decision exclusively on my opinion and/or assessment. If in doubt, ask a specialized lawyer or advisor if you want to be on the safe side.
What you need to know about Airbnb in Budapest:
- First, the expected INCOME: What can you earn? And what is left after taxes and expenses?
- Secondly, let's take a look at the RULES of the GAME - What laws affect you and how the market is developing
- Thirdly, we have to talk about RISKS - if they didn't exist, everyone would be doing it.
- Finally, I'll look at the PERSPECTIVES: How likely is a ban or massive restrictions in the near future?
INCOME or: What’s in it for you?
To get an idea of what kind of income you can generate, there are essentially three sources that will help you make an assessment:
1) is simple: you go to booking.com and airbnb, find something you like and randomly check for several months what prices you would have to pay.
2) You can use airdna.com, which presents the whole thing a little more analytically and clearly. There you will also get an idea of how the location affects prices and occupancy. But be careful: not a single one of our apartments is actually assessed precisely. So it doesn't help. You have to collect as many values as possible and form an average.
The third tool is hotels: Airbnb apartments, at least those that have come onto the market in recent years, tend to compete with hotel suites in the 4-star segment. I still prefer to use the simple room price as a basis, because there is no point in being overly optimistic. We know from surveys that many guests prefer Airbnb apartments to hotels, simply because the apartments have a kitchen and because they are ultimately more private.
You will notice that the prices per apartment and night vary greatly depending on the location, number of beds, season and day of the week - the values on Airdna, shown here, are somewhat optimistic in my opinion. 24,000 euros for an apartment on Joszef körút, which is a very good B location, but still not close to parliament, is ok as a benchmark, but the reality is probably around 10 to 15% lower. At least those are our observations.
It is therefore very important to find the right management company that deals with price optimization and then finds the sweet spot where utilization and income are in good proportion to one another.
On average we take 70 euros, with a utilization of 80%. In most of our apartments, the occupancy rate is higher than 80% all year round, except that in February the night costs more than 40 euros. But even in this weak month we often only have 2-3 days without guests.
As a statistical average, we now assume 7 million forints per year for a 40-50 sqm apartment in which up to 4 people can stay overnight.
That’s currently just under 18,000 euros per year.
This includes the management, cleaning costs, laundry service, repairs, taxes, in total you can expect a 40% deduction.
Then you will have around 10 – 11,000 euros of income left. Thanks to the double taxation agreement, this is really net.
The price question:
How much do you have to invest in Budapest to achieve this income?
Let's take a look at an example:
Entrance area, kitchen, new bathroom, spacious room with seating area, double bed, sofa and everything you need for Airbnb.
Such a finished apartment costs around 120 – 140,000 euros. If you buy cheaper, you will either have to invest a lot in renovation and furnishings, or you will make compromises on the location, which will then reduce your potential income.
Let's assume that you have invested exactly 150,000 euros including additional purchase costs. Let's just ignore the increase in value completely.
Then the net return after taxes would be just over 7%.
And in this model you can almost speak of passive income. It's not like you don't have to do anything at all. But there is little left to do. You have no contact with the guests, the bookings run without you, the cleaning logistics work, and technical problems are resolved immediately so that there are no downtimes. You may have to pay electricity and internet bills and file tax returns, which you can of course also outsource.
2: Rules of the game: taxes and laws for short-term rental in Budapest
Well, first there are TAXES.
Taxation is extremely low for private operators. Anyone who operates a maximum of 3 apartments via booking platforms is considered a private operator. Just to put it in perspective: You can have 8 separate bedrooms and a total of 16 single beds in each apartment. With the total of 48 sleeping spaces, you could write hotelier on your business card and still be traveling “privately”.
In any case, you will then pay a flat rate income tax of just under 100 euros per bedroom per year.
But the state and city then came up with a few taxes with which they participate in your income.
- First there is one Urban development tax of 4% and
- a so-called Building tax for the “misuse” of the apartment, which is based on the living space.
- And then there are those Tourist tax of 4% – but the guests pay that. Here you can find out more about them Taxation of Airbnb income
I estimate the tax rate to be less than 6% for short-term rental.
It gets really entertaining with them laws.
Since 2020, legislation has allowed municipalities and urban districts to impose restrictions, including those of a temporary nature. However, so far no district has made use of this right to limit time. Instead, Budapest districts have since come up with some original ideas to regulate Airbnb. Some of them are basically illegal, such as the story with the virtual parking space, which the 6th district wanted to have the airbnb landlord pay for around 10k euros, until one day it was clarified in court that the district wasn't even allowed to do that.
To add to the chaos: Owners' associations can also prove to be a powerful obstacle and write bans or special rules into their statutes. Some things are allowed, some things are contestable, some things can be ignored. That's why it's our job to check it very carefully before we recommend you buy an object.
There has also been this since 2022 Szallashely minösites – sounds like a magic spell or an incantation, but it is a very sensible idea: every newly applied for Airbnb apartment must undergo a quality inspection, a kind of inspection of the hospitality industry, which also has to be repeated every 3 years. Similar regulations apply to those in the hotel industry and no license is granted without passing the exam.
From my point of view, this is a great thing, because it means: if the authorities are so serious about the quality of the Airbnb offer, it seems somehow absurd that they would ban it completely in the next moment.
One thing is clear: the necessary tools to restrict Airbnb are available, but are hardly used. I would say: it is regulated with a sense of proportion. There are districts that are very relaxed about Airbnb, others have had worse experiences and stricter rules as a result. But the wooden hammer method, which would affect all private operators and take them out of the market, is not currently being discussed.
3. Risks for short-term rental in Budapest
First and foremost, there is definitely a political risk - rules can change, new laws can be passed, taxes can be increased just because the tide has changed and it turns out that parties can use it to win elections. Even though I think that's very unlikely, it's ultimately irrelevant. Politics does not always follow rational patterns, which is why it is so difficult to calculate.
But there are also market risks - the supply is constantly growing, also because tourism is now stable again and growing at record levels. Nevertheless, one must be aware that saturation will occur at some point and that returns in 5-10 years may be lower than today. We therefore recommend that our customers invest a little more in the uniqueness of the apartment with the help of design and furnishings. Good design means good utilization, and that leads to many good reviews. Home staging is more damaging – we would like to read the following in the reviews: “Looks great – just like in the pictures”.
Another factor is apartment size - in recent years, small apartments under 30 square meters have been the trend, where you can accommodate 2 people. This has now led to an oversupply, and we think it makes sense to take larger apartments, divide them up and then offer them to two to three couples, but at the same time also offer them in a bundle for 6 to 8 people.
This way you have all the options and can better adapt to your needs.
The risk factors also include the dear guests - you just don't know who comes into the apartment and how he or she treats the furnishings. But there are a few things you can keep in mind to keep the risk low. For example: not to provide an apartment that can be occupied by more than 6 people, or to keep common rooms as small as possible so that a party atmosphere cannot develop there. It is also worth taking older target groups into account when it comes to furnishings and equipment, because the general rule is: the younger the residents, the more the facility suffers. This means: elevators are important, and beds in galleries are rather inconvenient.
Professional management will ensure that damage is documented photographically and processed via the platform, and you can also take out Airbnb insurance that can cover such cases.
The next risk factor: the dear neighbors, i.e. the community of owners.
If your guests try too hard on your neighbors' patience, there is a risk that they will intervene with the city and request that your license be canceled. However, whether they would be able to get this done in court is another question that, as far as I know, remains unanswered. But in parallel, they could call a meeting and, with the help of the votes of 50% of the ownership shares, write a ban into the statutes of the house. This doesn't have to stress you out any further because it is accepted that existing licenses will not be revoked even after a change in the statutes.
But if you want to sell, the next interested party will notice the regulation in the statutes and expect a significant price reduction. Officially, he would no longer be allowed to operate Airbnb after the takeover.
However, this is also legally unclear, there is no fundamental judgment and there are definitely good arguments for continuing the business, because all that changes is the owner, the rest remains as before and as long as the co-owners have not been able to prove beforehand that the business is substantially affecting their quality of life, there is no valid reason to deny the new owner this right to use their property.
The fact is that from the WEGs' point of view, very, very many Airbnbs run smoothly, I would even say contactless, and the guests practically go unnoticed. The neighbors are often very skeptical at the beginning, but after a year or two this is no longer an issue. If you pay attention to these factors when designing your apartment and know how to keep loud groups away, this risk factor is manageable.
Game over for Airbnb in Budapest – or even more so now?
My thoughts on this in a few sentences:
- Tourism in Hungary contributes about 16% to the country's economy
- 40% of overnight stays are private rentals a la Airbnb
- The hotels cannot accommodate the entire 100%, and especially in the central districts of the city there is simply not enough space for the many hotels that would then be needed. The result would be too few and too expensive rooms.
- A resulting drop in overnight stays would cause a lot of consequential damage due to a lack of visitors. Covid has been very educational in this sense.
- Then on to the topic of renting: 90% of Hungarians live in their own homes.
- There are also many empty apartments in Budapest because the owners don't want to rent them out, but rather just keep them.
- Although Airbnb reduces the supply of rental apartments near the city center, it has practically no effect in the outer districts.
- The issue of rent and rental prices is therefore currently not a political issue that can be used to win elections at the national level.
Conclusion: WEGs and districts definitely have the resources to defend themselves against Airbnbs if they want to. A complete ban or global restriction seems unnecessary and politically risky, also because of the considerable economic collateral damage.
The overall package of low purchase prices, low taxation and very reasonable additional costs make the model very attractive and allow double-digit gross returns, which then results in net returns after taxes of between 6 and 10%.
I hope my comments could help you see the topic more clearly.
When we choose the property for you, you can be sure that we are also thinking about a world without Airbnb. The return may then be lower, but you will still enjoy your investment.
This is how our mission can be summarized: Enjoy your investment – now and in 10 years.
