FAQ'S For buyers of Property in Budapest
Can foreigners buy property in Hungary?
-Yes. Foreigners who do not plan on living in their Budapest property are obliged to apply for permission to buy but this is merely a formality, costs approximately £140 and takes between 4 and 6 weeks.
Do I have to set up a company to buy property?
-No. You may buy as an individual or as a company. Unless you are considering purchasing multiple properties, it is not particularly worthwhile setting up a company due to the overheads – £500 (approx.) to set up the company and £40 a month (approx.) in accountant`s fees.
Are the properties freehold or leasehold?
-All properties in Budapest are freehold. After purchase, your name will be added to the title deed.
If I buy a property in Hungary what tax will I have to pay on gains that I make when selling the property?
As of 1st January 2008 the way tax is calculated when selling a property in Hungary changed. A change for the better. If the property is sold after the fifth year of ownership or after there will be no tax on the profit, or no capital gains tax. The first year is classed as the whole or part of a calendar year and not on a twelve month period.
What about if I sell within five years?
Any capital gains will be taxed at a rate of 16%.
A sliding scale will apply, as follows:
If sold in:
Year 1 16% x 100% = 16% (can be part of a year)
Year 2 16% x 100% = 16%
Year 3 16% x 90% = 14.4%
Year 4 16% x 60% = 9,6%
Year 5 16% x 30% = 4.8%
Year 6 0% x 0% = 0%
What is the rental market like?
--For good properties in the central districts of Pest the rental market in Budapest is vibrant at the moment. This is principally because of the large amounts of ex-pats who work in Budapest for multinationals along with the local Hungarian professionals that they also employ. Lots of accommodation is also needed for the sizeable number of foreign students who study at the various international universities such as the Medical University and the Veterinary University.
What rental income can I expect?
This will of course vary from property to property. A pretty accurate rule of thumb is a 6% rental yield. If a property is worth around £100,000 a monthly rent of £500 is realistic. What is a better investment a classic apartment in a period building or buying an apartment off plan? There is no simple answer to this question. It really depends how ell you buy.
What is the difference between classic property and off plan?
Classic apartments in Budapest are usually housed in attractive period buildings, often built in Budapest's building boom between 100 to 150 years ago. Inside ceilings are usually 4 metres high, and large, wide double doors, big windows and parquet floors are typical. The cost per square meter is substantially lower than off plan or new developments within the same area. In a nutshell a classic apartment can be in a stunning building with bags of character and you get more for your money. However renovation work inside the apartment is often required and as you can imagine the buildings were not designed with car parking so no parking spaces. Although apartments do come with parking permits so you can park on the street.
New properties do not need renovating; they usually always come with underground parking, often with a balcony. Generally they make better use of floor space than classic property. They may be well designed and attractive buildings, but they do lack the character of a classic property.