Hungarian and Bulgarian property, Why?

BudaRich said:
One reason property prices wont fall in Hungary despite the usual desperate sellers is that there is no real house price index like there is in the UK or Ireland, there is no real way of reliably determining property value.
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I find this claim rather outlandish. You suggest that a good reason to invest in a market is that it is NOT transparent. Do you wanna by a used car from me. It runs well. Honest. Or maybe some sub-prime mortgage backed securities? I mean really.

BudaRich said:
Another good reason to say invested in Budapest is the Euro effect - the increased likelyhood of an early entry will have a profound effect once announced. Just earlier this week there was a long article in the Financial times regarding this - the only way to save the currencies within these countries is to bring them into the Euro early despite the obvious economic problems these countries has. This view is becoming more and more common and I forsee early entry for Hungary.
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Do you have references for this claim?

My search for a Financial Times article you hinted at brought up this one:

http://www.ft.com/cms/s/0/06a45f2a-...uid=ce5d915c-2037-11dd-80b4-000077b07658.html

It is apparently an opinion piece by one commentator, and is no way a statement of official policy or a leak of any impending announcement.

It did mention that adoption of the Euro is mandatory for these countries, because they signed the accession treaty (only UK and Denmark have an opt out clause) but that the EU authorities would have to abandon the existing Euro entry criteria to let them in early.

I wouldn't mind betting that the politicians would demand a price be paid for relaxing the Euro entry rules for Hungary.

What do you think that price would be?

- massive devaluation of the currency perhaps?
- forced austerity measures?
- punitive fiscal changes to balance the budget?
- asset seizures and nationalization?
- tightening of mortgage lending standards?

Again, I doubt that any of these uncertainties would be a good reason to make a new investment in such a market. Investors generally run a mile when they see the threat of government intervention in any market. But maybe I've just read the wrong article.
 
OK well if you dont like those explainations then consider this.

1. 95% of the population own their own houses with very little or no borrowing.
2. Very little property ramping from international speculators thus the low prices.

Also if you understand property cycles then you would understand the best time to buy is when the market you are buying into is at an all time low - with positive signs of recovery.

Hungary is years ahead when speaking of cycles, the usual painful economic reforms / austerity measures were already in place prior to this credit crunch, whereas the rest of the world is deteriating into a mess of quantitive easing / high inflation -> high interest rates.

I am investing for the long term, minimum 5yrs and ive stayed out of the "luxuary" market since that is where the pain will be since the luxuary market is dependent on international workers with nice corporate allowances which are squeezed during times like these.

Big property companies are pulling out of markets / delaying / cancelling projects where property markets were speculatively high = Romania, Bulgaria, Latvia all spring to mind. This does not seem to be the case in Hungary although there are delays due to financing.
 
I won't argue with a "buy low sell high" strategy.

As for Hungary already having had austerity measures in place prior to the credit crunch, that's also a good spin. So they were already drowning before the financial tsunami hit?

If you don't have anything other than reciting mantras that have been quoted endlessly on property agent's websites I don't feel any need to comment further, as these points have all been debated at length on in this forum in the past.

On the other hand, if you have some real news about the local market, that can be backed up with sources and evidence, I'm sure there are plenty of people here including myself who'd absolutely love to hear it. e.g. what are your current occupancy ratios, gross and nett rental return actually achieved to date, cost per m2 paid, estimated capital gain/loss per m2 to date?

I'm not ashamed to admit that (after following my own strategy of being long cash) I'm down about 20% on my investments compared to the peak. The FTSE 100 is down approx 40%. Worst investment I made was in a share fund of commodity companies: down over 60%. I think it would help the forum enormously if others played open book with their numbers (good and bad). Then we can learn what strategy worked or not in which market. I'm still looking to increase my investment in property, but up until now have not seen precisely the right opportunity for me.
 
BudaRich,

I accept that you understand the market in Budapest very well.Most Irish people will not have spent enough time in Budapest to invest wisely.If they are going to spend more time there the actual cost of the travel there is actually part of the cost of buying the flat.I accept that the likes of Budapest can offer good advice on where to buy and avoid the ''paddy price''.But the fact remains that to make the purchase profitable surely you would have to invest larger sums between €150,000 - €200,000.Please correct me if I am wrong.
I was only lucky that I did ok from my sale.Yet if you take the cost of the foreign travel, the rent after expenses did not cover the mortgage repayments, flat was vacant for 6 months before sale was fully closed therefore 6 months complex management fees etc. overall I barely broke even.This is a zero return for 4 years.I am not at all bitter but am just being practical.If you dont have substantial knowledge of a city/town then really you are ''taking a shot in the dark''.
In Ireland I have the rental property set up properly.With the initial cost of furniture and interest on mortgage I pay no tax (I'm sure this is possible in Hungary also with the correct initial set-up), I am in building any items needing attention are easy and cheap to remedy (every small piece of maintenance abroad costs money and the costs may be exaggerated), find my own tenants thru daft etc.
I agree that prices will continue to fall in Ireland.I would suggest that people in gainful employment save hard and with a decent deposit in a few years then make your purchase.I personally don't see how Hungary is immune from this world wide recession and I think that prices will continue to fall there.
Any flat/house/land is only worth what someone is willing to pay for it.
 
Its a strange quirk of human nature, but buyers always flock to a market when it is high, and run away when it is dropping, when logic would seem to dictate otherwise.
Budapest is a nice enough market, one of the world's great cities and located right in the centre of Europe. There is a fairly strong rental market, and with supply outstipping demand as regards sales, coupled with lack of finance, there are bargains to be had out there.
If a buyer was to consider trawling through the debris of the world's property market, he or she would be well advised to have a look at cities like Budapest. The forint is weak and buyers are scarce, and my personal experience has been that I have had very few misses with rental there in the last seven years. Certainly it makes a lot more sense than Dublin or indeed any Irish city, and while there are horror stories around they tend to emenate from buyers who either didn't do their homework and/or weren't on top of their business.
So, why Hungary? Its a stable market, Budapest is a great city, and the currency is weak and property cheap. Returns are better than most places, and entry levels are attractive. Still looks good to me, medium term anyway.
 
Martin77 said:
I'm down about 20% on my investments compared to the peak. The FTSE 100 is down approx 40%. Worst investment I made was in a share fund of commodity companies: down over 60%. I think it would help the forum enormously if others played open book with their numbers (good and bad). Then we can learn what strategy worked or not in which market.
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Best investment; I'm afraid it's been gold or failing that a high yield deposit account for a long time. I plumped for the latter option.

Martin77, I'm not sure there's any point asking for unbiased advice from Hungary or Bulgaria based property agents.

Those whose views on Hungary and Bulgaria that are banned are only replaced by more agents and others with vested interests speaking more guff.

I spent my time getting frustrated with this nonsense in the past and arguing with people about among others Serbia, Croatia, Bulgaria, Latvia, Hungary. They all crashed and people lost their shirts.

http://www.askaboutmoney.com/showthread.php?p=510432#post510432

The most shocking thread of the lot I saw was a bunch of Irish guys discussing whether they would lose their apartments in an old Jewish ghetto through war reparations.

For the record I never bought property here and have increased my savings by saving in deposit accounts and making one or two small share/investment funds that paid off. I never invested in Iceland either though I was mightily impressed by them two years ago.
 
gearoid said:
Martin77, I'm not sure there's any point asking for unbiased advice from Hungary or Bulgaria based property agents.

Those whose views on Hungary and Bulgaria that are banned are only replaced by more agents and others with vested interests speaking more guff.
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Understood. There is still huge value in this forum, once you work out the vested interests, which is relatively easy to do if you read old threads. You can take comfort in the fact that there will be fewer and fewer agents posting as time goes on, if you believe in Darwinism anyway.

Lollix does make a valid point about "trawling through the debris of the world's property market". It is a viable mid to long term strategy if you get the timing even almost right. However there is still the basic lack of market transparency to overcome.

I really don't mind losing say 20-30% on the capital gains side of an investment on the short term as long as the yield remains stable at my expected level of return. So all the headlines on capital valuations either up or down kind of miss the point for me. I firmly believe that in this climate, reliable cash generation is key to investment decisions.

Where's the data on trends in rental yield? Daft.ie is really transparent. You can instantly see what the current fair market rate is for almost any property location or type. As are similar sites in the UK & US markets: simply go online a try to rent a house or condo in the area you are looking. Up until now the yields are still way too low for my comfort level but at least it is visible. But these exotic locations? No way. They have maybe 20 apartments listed even on the biggest sites. Why would a typical investor want to get involved in such a specialised market?
 
I would agree with Lollix. I bought an apt in Budapest in '06 on Andrassy Ut using the services of Budapest (The Property Finder). For a flat fee he did the legwork for me & narrowed down the apts for sale worth viewing.
I've been to Budapest several times so have a good handle on the areas - it's not that expensive to visit, this Jan I got a Ryanair flight for €10 & 4*Hotel for 2nts €80. You just need to do your research re travel.
Since my apt has been ready to let, it has lain vacant for 4 wks max. It brings in a rent of approx 5%. Falling HUF is making it uneconomic to transfer at the moment but luckily I can afford to leave in my HUF a/c at a good int rate until things improve.

Not sorry at all I invested there & I'm in for the long haul. I might even fancy living there one day. It's a beautiful city and so central in Europe.
 
Perplexed said:
It brings in a rent of approx 5%.
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I'm pleased to hear that you are happy with your investment and I hope it continues that way. Each unto their own motivation and targets.

For yield comparison purposes, an investment I have in a publicly traded euro-denominated property fund currently yields 8.4% gross = 7.2% nett after I have paid all taxes and charges. The fund owns and exploits signature shopping centers mainly located in the Netherlands and France. Obviously retail margins and capital values will probably continue to be under severe pressure, so it is questionable whether this dividend will be maintained in the future, hence the recent fall in the share price (although to be fair they have maintained or even increased the dividend over many years)
 
I'm glad to hear you're making a good return, as you say to each his own.
I like to have full control of my investment. I am happy mainly because I happened to have the funds available. Some other funds I left in equities & they have halved at this stage. The actual bricks & mortar are still there and being in a prime area the property is always going to be desirable. I'm in no rush to sell - I may never sell if it continues to generate a reasonable income.
Those of us that are happy with our investments in Budapest are the ones who bought with our eyes open. We did not buy on the strength of sales talk at a Property Exhibition for a country we'd never been to.
In fact I think it's the people who were swayed by the promise of unrealisitc capital appreciation plus "guaranteed rental" are the unhappy ones now.
 
Perplexed,

Me too, I would love to live in Budapest. I recently stayed in the Baross Hotel near Keleti station for 280 Euro for 11 nights!!! (amazing deals if you book online).

Martin77

I would be happy to go into figures - Im up to my ears in Figures right now since I am completing on one of my apartments within a month. The bank only offered me a 40% mortgage - which is ok since I can find the rest (sold some gold). Since I have already found a tenant i am using the tenacy agreement to get a bigger mortgage.

I put a deposit for 20% several years ago on a 2 bed apartment - one of the best in the building + parking, this was when the £ was strong vs Euro. I purchased in the First phase of a big development project. The price was 1570 Euro per sq metre. My tenant will be paying in HUF - 425 Euro at todays exchange rate which I am happy with considering this is ONLY the first phase of the development and that the second phase has been delayed. The tenant is a corporate client and the company will pay me directly (Hungarian company).

So as you see this investment was specifically timed to take advantage of the property cycle, a long term development that essentially means my apartment will be "new" for longer than other wise. I chose not to buy in the UK because the prices had gone too high - too much debt in the economy. I predicted the property crash correctly and followed my instinct after alot of research.

I purchased in Budapest because
1. No property bubble & general time within the property cycle.
2. Reasonable yields.
3. Law heavily weighed in the Landlord's favour.
4. Sunny climate
5. Geographical location (surrounded by 7 countries with decent road network)
6. Proactive (in some areas) on adopting reform.
7. Energy security (hosting both EU and Russian pipelines thus the Switzerland of Energy).
8. Self sufficient in food production - food exporter.
9. Strong banking sector.
10. Americans love Budapest, Ive lost track of the sheer number of references to Budapest in movies.
11. Chinese love Hungary.
12. Good relations with both the West and Russia.
13. Low property prices when compared to other Capital cities in the region 20% cheaper.
14. Future Euro adoption plans 2012 entry likely or before (thanks to credit crunch).
15. Improving tax situation CGT / Income tax for property investors.

As far as I see it, the credit crunch has changed none of these 14 purchase reasons, if anything it has increased the speed that Hungary will joint the Euro, it has increased the speed of austerity measures, thus it will be in the best place to recover once this "crunch" has subsided. The low Florint will help this recovery process.

My investment strategy is to buy in the UK in two years since recent statements via various government organisations indicate that 3.5x income MAX mortgages will be the new order of things. I have no doubt that this will be mirrored right across the world. Thus UK prices still need to fall another 20% - two more years should get us there for the most part - 35-40% fall in total (it will be worse in Ireland though). SO in several years once this banking crisis has subsided I am going to refinance, release equity and purchase in the UK. In the mean time I will have a yield better than any savings rate.

The Florint will recover to about 230 to the Euro before Euro Entry in my view, thus again - if i had more cash available I would buy again right now!

No im not an agent and I have no agency affiliations.
 
I'm a fan of Budapest; I like the city and particularly I like where it is situated in the very centre of Europe. It is my belief that the power in Europe will shift away from Germany/France/Belgium in the future as recent members gain strength. That's just a personal view, and I know that others will differ, but so be it. I also acknowledge that some of the eastern members have a long way to go; Bulgaria and Romania are so riddled with corruption that the future is black for them, and the gross oversupply of "junk-bond" properties in Bulgaria at inflated prices has skewed that market beyond all belief. Bulgarian property will not give returns in my lifetime and my sympathies are with the many amateurs who "invested" there in recent times. Romania is a bit better; there is at least a good local market for anything with potential, and coupled with the big volume of "black money" looking for a home, the market there still ticks over at least.
In Hungary, and particularly Budapest, there is a steady market demand for good rental property, and in my own experience there I have found that it is possible to make reasonable returns. However I am watching that space keenly right now, for a number of reasons.
1. As I mentioned, it has been my experience that the right property in Budapest can give good returns; I am very happy with the performance of my properties right now in Budapest.
2. The forint is being hammered by speculators, and I am watching to try to find the bottom of the market so as to transfer spare euros to budapest with a view to buying a couple of properties to ad to my holdings there.
3. The price of some offerings is now well below the cost of construction, and still dropping when you factor in the forint/euro factor. (Many building projects are now being priced in hard currencies). This means that when the market turns, it will not be possible to offer new properties at anything like the price that they can be bought at now from distressed sellers.
Buying in Budapest is actually looking quite attractive at this point, and getting even more so, but I'm talking only about very good properties, well located, and where the owners need to sell.
 
I have been living in Budapest for several years, and am looking to buy my first property here. I'm from Asia. I've been hesitant for a while after seeing so many Irish/Brits getting stuck or breaking even at most (after transaction costs) except for those who bought in the 1st years of the decade. So, BudaRich's and Lollix's experience are definitely positive ones for me to learn from. While I like Budapest, I am not fully convinced yet of some of the reasons given for a sustained or growing market for Budapest property, mainly due to the financial & political problems in Hungary. The financial and political problems go deeper than in any of the neighbouring countries.
With most Hungarians owning their property (95% quoted in these posts), properties in Budapest are likely to be rented only by expats for any decent return. Looking at the current climate, I'm wondering how many new expats will come in over the next few years, and seeing the number of new apts available on the market, I'm guessing that the rental market will go down even further, making me wonder if I should take the plunge to buy.
I'm currently looking for a good (well renovated) apt in the 1st district (the castle area), and if any Paddy has something between 100-120 sqm, I'd be interested (renting also if I'm still not convinced enough to take the plunge).
 
@Don King et al - Sorry, seen it used often enough here. Like I said, I'm from Asia, so I didn't mean it in the same way as the Brits.
 
Hi,

I agree with you. I work my self in a company offering property management services and we have been able to rent most of the properties until now, to some expats but most of the time to Hungarians. Also some international agencies are relocating here their staff and they will need to rent and some of them buy properties. Prices are not going so down like in other contries. Whenever I talk with colleagues in sourronding countries they say that the situation is really worse there.
I can only agree with you.
 
Due to the delay in new build projects in Budapest due to financing issues, the oversupply of new build property will soon become an undersupply which will force prices higher. It must be so for it to become profitable to build them once more. Also consider the availability of land for big new build projects such as Corvin or Karolyi Gardens is becoming far harder to find.

There is always a demand for newbuild, if not to own then certainly still to rent.

This is why new build / nearly new energy efficient is the best option now. Find a place near metro, and within a 15 minute metro journey into Deak in one of the more preferred districts such as District 13, 7 or 4 and you will never struggle to rent it out to students or office workers if you find a good agent.
 
I don't really agree with you, BudaRich. New-builds are still oversupplied and over-priced in most of the city, with no evidence of change for the foreseeable future. The Corvin project alone is huge and they've only really started.

In terms of rentability, even quality developments like Gozsdu Udvar are proving difficult to shift at the moment. It's possible to get a nicely-furnished one-bed there for 320 Euro per month! The high purchase price of this development means that yields are very low - as bad as 2-3% gross.

I don't agree either that Districts 4, 7 or 13 are 'preferred'. Unless it's a very specific part of inner 7 or 13, these locations vary from average to undesirable. At the minute, the prestigious, traditionally Hungarian-only districts of inner-Buda (1 and parts of 2 and 12) are proving to be interesting, as some locals are feeling the economic strain and are being forced to sell. Prices are much more flexible in this area than a couple of years ago, where they were too high to allow for strong yields. The quiet streets of either the lower Rozsadomb area or the Castle District will always be popular. There continue to be some interesting propositions too in the prestigious streets of central Pest, but the supply of good properties continues to be low.

For the most part, new-builds are only a good idea if you can negotiate a substantial discount from the builder - which may be possible in some developments.
 
I cannot comment on Hungary but from my experience most Irish (and majority of British) invested in new build apartment blocks and holiday complexes in the main resorts in Bulgaria - Sunny Beach, Golden Sands, Bansko etc. These developments were pushed hard through advertising in the media and online as offering a cheap investment (although with hindsight not actually cheap), guaranteed rentals (never materialised or if they did you were just getting your original money back as paid over the odds), and massive capital gains. I remember seeing signs in Sunny Beach promising 50% in a year. Usually large Irish or British agencies were involved and so people tended to trust them more. TV programs such as 'A Place in the Sun' possibly started, but certainly fuelled the buying frenzy. The majority of people never came to Bulgaria to see where they were buying, many just signed as and when told to by the agent with no independent lawyer...

A few year later and many are still waiting for their apartments to be completed, for some there will never be an apartment as the agent/developer as gone bust/done a runner.

I do know a few Irish that bought rural property inland as holiday homes or for investment, but 95% have bought into the over hyped and over priced resorts.

I guess people fell for the media hype, the hope of quick returns or at least guaranteed rentals to cover mortgages. Many were promised or offered mortgages, put down deposits and then discovered mortgages not available to complete.

The whole situation in Bulgaria in places like Sunny Beach and Bansko was a disaster waiting to happen, regardless of economic downturn and the recession. An expensive learning curve for many. Irish investors have been particularly hard hit as they have the Euro. At least for British investors selling at a loss and converting back to pounds, the loss is not as great.
 
This is exactly why I didnt buy in Bulgaria or like places. For sensible investment you should always stick to capital cities and in places that are not ramped up by property speculators. Very few companies were pushing Hungary or Budapest.

Budapest prices are / were 20% below most other capital city average prices in the region - now that these other areas - prices are crashing, the correction should bring things back into line.
 
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