Real estate purchase prices in Budapest – in European comparison

Prices per square meter in Budapest are still far behind those of other European capitals. And although Prague is quite similar to the Hungarian capital in terms of population and geographical location, prices there have risen significantly in recent years - near the center, prices there even seem to overtake Berlin. A development that is also coming to Budapest?

What happened in Prague and what does it have to do with Budapest?

The development of Budapest and Prague since the end of communism in the two countries has some similarities and differences. Here are some aspects that connect them:

1. Communist past

Both cities were part of the Eastern Bloc and experienced political, social and economic changes during the communist era. In Prague, the Communist Party of Czechoslovakia (KSČ) staged a coup in 1948 and established a communist government that lasted more than four decades. Budapest was also part of the Eastern Bloc and was subject to the influence of the Soviet Union. The communist era in Hungary lasted until the political change in 1989.

2. Velvet Revolution and democratization

Both cities witnessed the so-called “Velvet Revolution”. In Prague, mass demonstrations and popular pressure led to the removal of the communist government and the restoration of democracy.

Similar events took place in Budapest, and Hungary also opened up to political reform and democratization.

3. Tourism and Modernization:

Since the political change, both Budapest and Prague have developed into modern metropolises. Although Prague is the better-known of the two cities worldwide, the number of overnight stays in both cities is now about the same (Budapest, 11.7 million overnight stays, Prague: 13.8 million overnight stays), although Budapest, as a larger city (1.7 vs. 1.2 million inhabitants), may have the greater growth potential. Many travelers to Prague report overcrowded streets (“overtourism”), something that has not yet been heard about Budapest.

3. Architecture and urban reconstruction

Prague has preserved and modernized its historic architecture. The Old Town, Lesser Town and Hradčany are popular areas for tourists and locals. Budapest has also experienced impressive city reconstruction over the last 20 years, including the renovation of the State Opera. This is what particularly stands out at the moment Hauszmann project out.

The National Hauszmann Program (Hungarian: Nemzeti Hauszmann terv) provides for the renovation and reconstruction of buildings in Budapest's Castle District. It is named after the Austro-Hungarian architect Alajos Hauszmann, who served as architectural director for the expansion work on the Royal Castle for a decade and a half and shaped its current neo-baroque appearance.

The program was launched by the Hungarian government in 2014 with the aim of faithfully rebuilding the buildings that were destroyed either in World War II or during the communist era. Some of the main goals of the Hauszmann program are:

• Reconstruction of historical buildings: The program focuses on the reconstruction of buildings in Budapest's Castle District that are historically and culturally significant. These include the riding hall, the Palace of Archduke Josef, the Saint Stephen's Hall, the Ybl Stairs and the former headquarters of the Red Cross.
• Reconstruction and restoration: In addition to reconstruction, reconstruction and restoration work is also being carried out. This includes the renovation of the Weissenburg Rondell and the surrounding gardens as well as the restoration of the equestrian monument by Artúr Görgey and the Matthias Fountain.

The Hauszmann program contributes to preserving Budapest's historical heritage and increasing the attractiveness of the Castle District. The faithful restoration of the buildings gives the city a cultural and architectural jewel.

4. Scarcity as a price driver: Buildings in the historic center are limited

Both cities have a relatively limited city center, and due to the low building height (usually a maximum of 4 floors), this leads to a manageable number of properties and apartments. Investors, who represent almost half of buyers in inner-city areas, clearly prefer properties with a historical background.

While the dilapidated condition of these buildings is still slowing down value growth in many places in Budapest, the renovation of buildings in cities such as Prague and Vienna appears to be almost complete. With increasing renovation activity, it can be assumed that Budapest will close this gap sooner or later.

Why many Budapest residents don't sell their apartments

There are a considerable number of empty apartments in the city center that are not used by their owners, but at the same time are not rented or sold. The reasons for this are obvious:

• Despite the global financial and real estate crisis, despite the pandemic, delivery bottlenecks, war in Ukraine: the growth in value between 2010 and 2021 was already over 100% - on average. A sale without necessity therefore seems absurd, because the property is not only a store of value, but also obviously brings a high return, without any intervention. 
• However, a look at Prague should also provide sufficient reasons for the wait-and-see attitude, where prices 10 years ago were roughly at the same level as Budapest today. Anyone who sells now must fear that they have given up the family treasure far too early.
• Asian buyer groups have almost completely disappeared since 2020 due to the Covid restrictions, but have been returning with a lot of capital since 2023 and are further fueling demand. 
• The relatively low level of new construction activity in recent years is likely to further exacerbate the shortage of existing properties, at least for those who would like to live centrally.   
• Budapest is one of the few capitals where Airbnb is still relatively easy. This leads to high rental yields, which will be able to cope with a considerable increase in prices. Even in long-term rentals, there is a lot of demand from foreign tenants (expats and location-independent freelancers) who are willing to pay significantly higher rents.   

So you don't need too much imagination at the moment to bet on rising prices in Budapest.

Sources:

• Berlin: Berlin Sparkasse – McMakler
• Paris: McMakler
• Warsaw: Realting.com
• Prague: Real Estate Magazine – numbeo.com – Radio Prague International
  per sqm, in the city center: 170,888.94 Kč (approximately €6,600.00 – €8,800.00)
  per sqm, outside the city center: 120,606.06 Kč (approximately €4,700.00 – €7,000.00)
• Budapest: Duna House