Prices and rental income are among the highest, meaning that the Hungarian capital remains an excellent destination for those investing in residential real estate.
The new Hungarian investment program for guest investors combines real estate investment with a Hungarian residence permit.
In recent years, prices in the Hungarian residential real estate market have increased by almost 250%, with the increase being the most significant in Budapest, the capital. Despite this considerable price increase, the Budapest residential real estate market remains an excellent choice for foreign investors, as the Hungarian capital offers attractive prices and investment residency opportunities compared to international opportunities.
According to data from the National Bank of Hungary, the value of apartments has increased significantly in recent years in Hungary. Over the past nine years, between the first quarter of 2014 and the first quarter of 2023, residential real estate prices have increased by 231%, which means that the annualized return on value growth has been over 14%. In Budapest, the price increase was even higher than the national average. In the capital, prices per square meter soared and, in the first quarter of 2023, residential real estate cost almost four times more than at the beginning of 2014 - this increase translated into an annualized return of 16.4% for owners.
Foreign Investors
Foreign investors should evaluate their options before investing in residential real estate and explore the price differences and potential returns in attractive cities. For example, while the price of new residential properties in Tel Aviv in 2022 was almost EUR 15,000 per m², it was only around EUR 2,000 in Riga, Latvia (Read: How to buy property in Latvia?).
Although there has been a significant increase in prices in recent years in Budapest, in an international context it is still considered a relatively cheap city: in Budapest, Zagreb and Warsaw, the price per m² of new residential properties was below EUR 3,000 in 2022.
It is not only low prices that can attract investors to the Hungarian capital. Gross yields, calculated from purchase prices and rental income, are also among the highest.
The Hungarian Rental Market
The rental market is experiencing excessive demand, further fueled by the low number of real estate transactions. Although the annual growth rate of rents has slowed down between September 2022 (24.2% in Budapest, 22.4% nationally) and March 2023, it remains high, with an increase of 19% in Budapest and 18% nationally in the annual growth rate of rents for available apartments.
Even in the suburbs of Budapest, which were once the most affordable, the average rent has reached two hundred thousand forints. In the rental housing market, a public rental housing program could help, as well as improvements to the outdated legislative and enforcement systems.
Furthermore, as in other cities abroad, the services available on the Budapest market allow foreign investors to realize a rental yield on their property effortlessly. Property management companies can handle all aspects of apartment management, from furnishing to finding tenants to managing rents and utilities.
The future of the Hungarian real estate market
Without a doubt, 2024 presents a compelling opportunity for real estate investment in Hungary, as evidenced by a combination of favourable signals that indicate a promising investment climate. Hungary’s reputation for stability provides a solid foundation for investors looking for a reliable environment for their assets.
This stability minimises potential risks and ensures the long-term value of real estate.
Despite the remarkable increase in Hungarian real estate prices, the Hungarian real estate market remains incredibly attractive. The overall cost of living in Hungary is still relatively low compared to other EU countries, making it an attractive destination for both local and foreign investors.
Tourism also plays an important role in the Hungarian economy, contributing to job creation and GDP. With its breathtaking architecture, rich history and thermal baths, Budapest is a key attraction. Other destinations such as Lake Balaton, Debrecen and Eger also attract significant tourist traffic, giving investors access to the holiday rental market.
The steady increase in Hungarian real estate values means a growing demand for real estate. This trend reflects positive market dynamics, which can lead to capital appreciation for real estate investors. In addition, the growing wealth of the Hungarian population can further fuel the demand for housing and contribute to the long-term growth potential of real estate values.
While there is no crystal ball to predict housing prices, the strong historical performance and current trends of the Hungarian real estate market indicate that it will continue to rise, making it an ideal place to invest.
Summary
The new Hungarian guest investor visa will significantly increase the demand for high-value real estate this year and in the long term as well. This is the right time to act and get the best deals.
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