Buy property abroad? 6 reasons why Budapest is the right destination.

Buy property abroad?
6 reasons why Budapest is the right destination.

If you are thinking about investing in residential property abroad, then you should definitely take a closer look at the Hungarian capital, Budapest.

First, let's take a quick look at the following map of Germany.

The purchase price and rental income are linked here. The greener, the faster you can pay off the apartment in full using the rental income. Unfortunately, the greenest spots are the riskiest for a landlord.

A main reason for this is that demographic Development. Areas with high rental yields are only because prices there are under pressure and the risk of rent defaults is high.

In metropolitan areas, on the other hand, everything is orange to dark red. That's more in the direction of 30-70 annual rents. The rental yield is minimal, but in return you can be reasonably sure that the apartment will be rented out permanently.

In addition, buyers are used to years of price increases and simply assume that things will continue like this, at least in metropolitan areas. The fact that the loans were granted almost free of charge also contributed to this.

Admittedly, if you use cities like Paris, London or Shanghai as a benchmark, you still see a LOT of room for improvement. On the other hand, Germany has already reached an area where the risk of a bubble is considered to be very high.

Just remember this – a good relationship is essential 25 annual net rents, because that corresponds to a 4% return. always assumed that the value of the property remains stable or grows - and it's not JUST the location that determines this.

More on that later.

Now let's get to them 6 reasons to invest in real estate in Budapest:

1 – Hungary is part of the EU

And the country with its almost 10 million inhabitants cannot afford to leave the club. No matter how the Orban government complains about Brussels, it is primarily rhetoric.

This was shown, for example, in the acceptance of the Rule of law mechanism in 2021. Orban threatened a veto, but was only able to delay it slightly, and as a result we are now seeing that the first serious procedures are actually being started. And the payment of Corona aid is now linked to conditions for transparency, without which nothing will be paid. But it was about time.

Some argue that this confrontation could lead to an exit from the EU. For a net receiver, this scenario is downright absurd. Around 4% of economic output ( around 5 billion) are sponsored by the EU. And to be honest: the consequences of Brexit are anything but encouraging for imitators, at least at the moment.

In addition, Hungary is not an island - quite the opposite: Hungary sees itself today more than ever as a country “in the heart of Europe”. After leaving, the country would only have Serbia and Ukraine as non-EU neighbors and that is definitely not the stuff from which the economic miracle is created.

By the way: Germany alone delivers 25% of foreign direct investment into the country, and together with Austria, almost a third of the trading volumes.

2 – Budapest is a capital city

It has 1.7 million inhabitants and is by far the most populous city in Hungary. If you include the immediate catchment area, there are even over 3 million people.

As the capital, Budapest is an indispensable part of the country's identity. The most important historical events took place here.

An example: We recently went for a walk in the city's largest cemetery - it's hard to believe, but here you can find practically everyone who has been important in Hungarian politics or culture since around 1850. AND you can tell by the size of the tomb how important he or she was to the nation.

Over time, capitals develop an irresistible “magnetism” that attracts everything: business, culture, and… people from all over the world.

Unlike holiday resorts, capital tourism is largely independent of the season or tourist trends. City trips are also popular in the cold winter, when tourist hotspots turn into ghost towns. In Corona-free years, that's around 4 million overnight guests per year - only in Budapest! https://www.statista.com/statistics/986072/budapest-tourist-arrivals-in-accommodation/

This is important for us because I would rather invest in a city that not only has history but is also important for the future of the country. THAT is a solid basis for me.

3 – Purchase prices and rents

In Hungary, property prices generally rose by 80 - 90% between 2010 and 2019 - depending on which statistics you believe. Here, for example, is the data from Eurostat, where a performance of well over 10% has been the norm since 2013.

By European standards they are still very cheap.

At the same time, the rents are not that cheap.

If you remember the map from the beginning, imagine that the “green” areas, where you can get by with a good rental yield of 4%, were in the middle of the capital. Unimaginable for Germany!

But absolutely real in Budapest.

In any case, it is currently still possible to buy apartments for 2 - 3000 euros per square meter, even in very good locations. That then depends on the condition.

The upscale furnishings start from €3,000/sqm upwards and anyone who sees apartments in the €300 – €500,000 range and experiences their surroundings might prefer to set up their home office here.

But let’s not talk about luxury owner-occupied properties.

I'm thinking more of a “solid” investment size between 100 and 200,000 euros that can be rented out to normal people with normal incomes.

First a look at Germany, I discovered this by chance:

50sqm near Dortmund for 140,000 euros.

At least – with a bus stop – that’s something.

The 6.50 euros rent per square meter promised by the project developer means that it will take around 35 years to pay off the rent on the property.

A condominium in a listed building would also be possible for the same price and the same size:

In close proximity to the National Museum and Palace District in the 8th district in Budapest.

Renting to foreign students from the nearby medical faculty will definitely cost 8-10 euros per square meter. That is then a ratio of 23 – 30 JNM.

But what is even more important - for me at least - is that while one building is being written off year after year and can probably only be demolished after 50 years, the other is becoming more and more valuable.

Maybe it's like a good wine.

If you would like to discover such treasures, contact me.

At this point we would like to point out that we at Budapest Invest are neither investment nor tax advisors. You decide your investment strategy yourself. Our job is to find the right thing for you and your budget, and to support you with purchases, renovations and rentals - all in German.

4 – Performance

You cannot make the past years before Corona, with their 10% increase in value per year, the benchmark for the future. Things don't always work out, even if you'd like to believe they will.

But you can look at the risk factors that could stand in the way of a positive development, especially in the LONG TERM.

One of the scenarios, leaving the EU, was already discussed.

Another scenario would be a prolonged recession, triggered by initially high inflation, rising interest rates, more and more bad loans, and ultimately collapsing real estate prices in Europe or worldwide.

But a look back shows that someone with a time horizon of 10 years was able to survive such crises without any damage. Hungary also had to cope with a severe recession between 2010 and 2013. In 2019, prices were still 90% higher than in 2010. The only people who were worse off were those who HAD to sell during the crisis.

This is of course relevant in the long term Population development: it is now negative in Europe and that will be a major challenge in the next few decades. This can certainly be a problem for smaller cities and districts, but not so much for metropolises, because they offer the important economic, social and cultural infrastructure.

But it is also clear – this is just an opinion and not a prophecy.

In my opinion, much more important because it influences everything: the climate!

If you want your property to have POSITIVE performance over the next 10-20 years, climate may even be the most important factor to consider.

You can ride out recessions and stock market crashes in a few years, but 1.5 - 2 degrees of global warming will produce lasting changes that no one can reverse.

An example:

forecasts of the UN Intergovernmental Panel on Climate Change According to the report, the Mediterranean region, the most popular holiday region for Germans, will be hit particularly hard in the foreseeable future because the consequences of increasing heat are reinforcing each other. Some people have a holiday home on the Greek or Turkish coast and are now wondering how the value will develop if new temperature records and fire disasters are to be expected?

The holiday home with its own pool on Mallorca no longer sounds so dreamy if it is forbidden to fill it due to increasing water shortages.

What does all this mean for Budapest? First of all, Hungary is loud World Risk Report in the “green area”. That doesn't mean that everything will stay super relaxed here forever. But I know one thing: major cities, especially capitals, generally mobilize all available resources to protect the lives and property of their residents.

5 – COSTS

Electricity, gas, water, administration, all the additional costs that seem to have no limit in Germany and often result in a 50% surcharge on the basic rent. And that hurts even more when the apartment is empty.

Owners in Budapest hardly have that. The costs for electricity and gas are subsidized and are the cheapest in the EU. 10 cents for electricity, which is less than a third of the German prices. And the housing benefit for administration, elevator, caretaker, etc. is usually around 50 euros per month.

This is also why the cost of living is around a third lower than in Germany. When it comes to wages for craftsmen, the difference is even greater. And it is precisely these costs that sometimes decide whether an investment is worthwhile or not.

6 – FLAIR

The best for last, so to speak. This point, which perhaps seems the least 'rational', is crucial for many people. Budapest is architecturally closely related to Paris, Vienna, Berlin and London. That's why the city is often used as a backdrop for Film productions used that, according to the script, don't even take place there.

Budapest has survived world wars and uprisings relatively well, and as a result, most of the residential buildings in the inner districts of the city are listed buildings from the Wilhelminian era and Art Nouveau.

However, preservation and restoration was only conceivable after the end of communism, and a lot has happened, especially thanks to EU aid.

Nevertheless, sometimes you walk past buildings whose magnificent heritage you can still see, but also the bullet holes from urban warfare. But even these buildings have something irreplaceable. Story! And as the owner of an apartment, you also own part of it.

The city also supports owners' associations if they want to renovate their building or restore the facade. With a bit of luck, you can come across an apartment at the exact time when such a project is due.

If you are interested: for a first step Simply register via our website.