Buy property abroad?
6 reasons why Budapest is the right destination.
If you are thinking about investing in a vacation home abroad, then you should definitely take a closer look at the Hungarian capital, Budapest.
Let’s take a quick look at the following map of Germany beforehand.
Here the purchase price and rental income are linked. The greener the faster you can completely pay off the apartment with the help of the rental income. Unfortunately, the greenest spots are the riskiest for a landlord.
A main reason for this is demographic Development. Areas with high rental yields are only there because prices are under pressure there and the risk of rent defaults is high.
In the metropolitan areas, on the other hand, everything is orange to dark red. That goes more in the direction of 30-70 annual rents. The rental yield is therefore minimal, in return you can be reasonably certain that the apartment is also 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 the 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 assessed as very high.
Just remember the following – a good ratio is 25 annual net rents , because that corresponds to a 4% return. always provided that the value of the property remains stable or grows – and this is not ONLY decided by the location.
More on that later.
Now let’s move on to the 6 reasons that speak for a property investment in Budapest:
1 – Hungary is part of the EU
And the country with its almost 10 million inhabitants cannot afford to leave the association. It doesn’t matter how the Orban government complains about Brussels, it’s mainly rhetoric.
This was shown, for example, in the adoption of the rule of law mechanism in 2021. Orban threatened with a veto, but was only able to delay it slightly, and as a result we can now see that the first serious proceedings are actually being started. And the payment of the corona aid is now linked to conditions for transparency, without which nothing will be paid. Finally.
Some argue that this confrontation could lead to an exit from the EU. For a net recipient, 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 at least working currently anything but encouraging for imitators.
In addition, Hungary is not an island – on the contrary: Today more than ever, Hungary sees itself as a country “in the heart of Europe”. After a The country would only have left Serbia and Ukraine as non-EU neighbors , and that is definitely not the stuff of the economic miracle.
By the way: Germany alone brings 25% of foreign direct investment into the country, and together with Austria accounts for almost a third of the trade volume .
2 – Budapest is a capital
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 more than 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 of importance 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: economy, culture, and … people from all over the world.
The capital is different from holiday resorts-Tourism largely independent of the season or tourist trends. City breaks are also popular in the cold winter when tourist strongholds become ghost towns. In Corona-free years that is around 4 million overnight guests a year – only in Budapest! https://www.statista.com/statistics/986072/budapest-tourist-arrivals-in-accommodation/
This is important to us because I would prefer to invest in a city that not only has history, but is also important for the future of the country. THAT is a solid base for me.
3 – Purchase prices and rents
In Hungary, property prices have generally risen by 80-90% between 2010 and 2019 – depending on which statistics you can believe. Here, for example, the data from Eurostat, for which a performance of well over 10% has been the norm since 2013.
They are still very cheap on a European scale .
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%, are in the middle of the capital. Inconceivable 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.
From € 3,000 / sqm upwards, the upscale furnishings start and if you see apartments in the range of € 300 – 500,000 and experience their surroundings , you might prefer to open your home office right here.
But let’s not talk about owner-occupied luxury properties.
I am thinking more of a “solid” investment between 100 and 200,000 euros that can be rented out to normal people with normal incomes .
First a look at Germany, by chance I discovered this:
50sqm near Dortmund for 140,000 euros.
After all – with a bus stop – is something.
The 6.50 Euro rent per square meter promised by the project developer means that it takes about 35 years to pay off the property with the rent.
For the same price and in the same size, however, a condominium in a listed building would also be possible:
In close proximity to the National Museum and Palace Quarter in the 8th district in Budapest.
A rental to foreign students from the nearby medical faculty definitely brings 8-10 euros per square meter. That is a ratio of 23-30 JNM.
But what – for me at least – is even more important: While one building is 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 feel like discovering such treasures, contact me.
At this point a note: We at Budapest Invest are neither asset nor tax advisors. You determine your investment strategy yourself. Our job is: to find the right thing for you and your budget, and to support you with buying, renovating and renting – all in German.
4 – performance
You cannot make the years before Corona, with their 10% increase in value per year, the benchmark for the future. Things don’t always go well, even if you want to believe in it.
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, an exit from the EU, was already an issue.
Another scenario would be a prolonged recession, triggered by initially high inflation, rising interest rates, more and more bad loans, and finally falling property prices in Europe or around the world.
But a look back shows that someone with a time horizon of 10 years could survive such crises without damage. Hungary also had to cope with a severe recession in 2010-2013. In 2019 the prices were 90% higher than in 2010. The only bad thing was those who HAD to sell during the crisis.
Of course, population development is relevant in the long term: that is now negative in Europe and that will be a great challenge in the next few decades. This can be a problem for smaller cities and districts, but not for metropolises, because they offer the important economic, social and cultural infrastructure.
But it is also clear – this is only 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 a POSITIVE performance in the next 10-20 years, the climate may even be the most important factor to consider.
You can sit out recessions and stock market crashes in a few years, but 1.5-2 degrees global warming produce permanent changes that no one can turn back.
An example:
Forecasts of the UN Intergovernmental Panel on Climate Change According to the Mediterranean region, i.e. the most popular holiday regions for Germans, will be hit particularly hard in the foreseeable future, because the consequences of the increasing heat will be mutually reinforcing. Some people have a holiday home on the Greek or Turkish coast and now wonder 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 fantastic if it is forbidden to fill it with increasing water scarcity.
What does all this mean for Budapest? First of all, Hungary is loud World Risk Report everything OK”. That doesn’t mean that everything stays super relaxed here forever. But I know one thing: major cities, especially capital cities, generally mobilize all available resources to protect the lives and property of their residents.
5 – COSTS
Electricity, gas, water, administration, all the ancillary costs that seem to know no limit in Germany, like to add a 50% surcharge on the cold 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 the cheapest in the EU. 10 cents for electricity, that is less than a third of the German prices. And the housing allowance for administration, elevator, caretaker, etc. is usually around 50 euros per month.
This is one of the reasons why the cost of living is around a third lower than in Germany. The difference is even greater when it comes to wages for craftsmen. 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 is perhaps the least ‘rational’, is decisive for many. Architecturally, Budapest is closely related to Paris, Vienna, Berlin and London. That is why the city is often used as a backdrop for Used film productions that, according to the script, do not even play there.
Budapest survived the world wars and uprisings relatively well, and accordingly 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, mainly thanks to EU aid.
Nevertheless: Sometimes you walk past buildings whose magnificent heritage you can still see, but also the bullet holes from house-to-house fights. But even these buildings have something irreplaceable about them. Story! And as the owner of an apartment, you also own part of it.
The city also supports owner associations if they want to renovate their building or restore the facade. With a little luck, you will get to an apartment at the point in time when such a project is due.
If you are interested: To take the first step , simply register via our website .
