Chinese, German and Dutch buyers remain active in the residential market in Hungary, especially in Budapest and some popular touristic regions. The weakening local currency makes homes even more attractive to invest in. Property Forum talked to László Balogh, Chief Economist at ingatlan.com, Hungary’s largest listing platform, about the latest trends and the possible new wave of foreign buyers coming to the country.
Foreign private investors seem to play a larger role in the residential market again. What is the major drive for those who put money in that real estate segment in Hungary?
Foreign buyers are very popular among Hungarian sellers. Their major drive is the low price of Hungarian real estate assets. Those investors who are willing to pay in USD or EUR could see a 10-15% cut-off in Hungarian property prices in 2022 because of the FX-rate changes.
Some of the core investor nations have disappeared or are way back on the top list compared to the first decade of this century. What are the major changes on the list over the past 3-4 years?
On average 5% of the buyers come outside of Hungary. The latest official statistics on foreign property buyers are available for 2020. The biggest source country of foreign buyers was Germany, Slovakia, Romania, China, and Austria that year. These countries were in the TOP5 in the previous years as well.
László Balogh
Chief Economist
ingatlan.com
Which nations are the front runners this year?
In the lack of official statistics, we can only use our data as ingatlan.com is the most popular property portal among foreign and Hungarian buyers as well. We found that most foreign buyer leads have come from USA, Germany, Austria, Slovakia, and Romania in 2022.
Why do you think Dutch and Germans who usually buy houses for their use look for regions other than earlier? Is that a question of much lower price let’s say in Southern or Northern parts of Hungary or they are motivated by other factors?
Each nation has different trends when choosing its property. Germans have a special connection with Lake Balaton while Dutch buyers are not only interested in the property itself but the surrounding agricultural areas as well. One thing is certain: there are no investors who would be enemies of their own money. This might be the reason why they pick places where property prices are much lower than the average.
Tell us about the preferred property type for leading foreign buyers in Budapest, at lake Balaton and some important regional cities.
Downtown Budapest is more than popular among foreign investors. Almost 30% of the transactions were completed by foreign buyers in 2020. Newly built properties are also favourites to them in Budapest. There are big projects in the capital where 40-50% of the flats are sold to foreign investors. Budapest emerged as a metropolis in the past decade where almost 10% of the population is non-Hungarian.
Budapest is cheap among buyers or tenants coming outside from Hungary. Flats in the Budapest city centre can be purchased for €3.1-3.2 thousand/sqm on average. The average rental fee in Budapest is €490 per month. There are areas, districts, and zones in Hungary where people of different nations can feel at home. For example, the Chinese population and buyers are significant in the X-XVI-XVII-. districts of Budapest. Hévíz (spa town near Lake Balaton) is so popular among Russians that parking rules are indicated in the Russian language too. The Balaton highlands are often visited by German or Austrian buyers.
Two decades ago, we witnessed Irish and Israeli investors invading the local buy-to-rent market. How about foreigners’ role in this segment now? What is their minimum yield expectation to make such transactions?
Buy-to-rent yields were exceptional in Budapest 6-7 years ago. The Gross Rental revenue/Purchase Price (GRR/PP) ratio exceeded 8-9% in 2015. These revenue streams were also supported by a 20-25% price increase per year until 2020. Investing in Hungary and Budapest offered supreme opportunities for property buyers. In 2022 the average GRR/PP ratio dropped to 4,9% and the average price growth slowed to 14-15% per year in Budapest. The Hungarian capital has become even more popular among Asian buyers: 91-95% of Chinese and Vietnamese property buyers invest here. Budapest remained also a favourite among Israeli investors: 90% of them purchase property in the Hungarian capital.
Foreign investors are happy to see the weakening local currency and appear to win at their transactions. Will they keep buying at the current level of Hungarian forint or they should wait till a further decrease?
Considering the level of Hungarian property prices, it might have seemed cheap to foreign investors in 2021. The situation has become better from their perspective this year. The rising inflation rate, and energy crisis on the European scale, incurring geopolitical risk may cause volatility in HUF/EUR rates in the forthcoming period. Not only the FX rates might be interesting these times. Escalating utility costs may change the trends of Hungarian property prices. To mitigate these risks, it might be a good idea to wait until 2023 Q1.
