As you are aware I am purchasing in the same development as yourself. My take on the situation is that it is a good long term investment in a good location where there will be no problem whatsoever letting it.
The deposit was made over a year ago before the pound collapsed - so we have retained value there - we are 20% better off than if the money was still in £ (yet this is only paper profit). The rental income will be enough to cover the monthly mortgage payments. Not only that but we have an asset 90k euro, that we own purchased when the £ was 20% stronger than now (again only paper profit). One thing that will be real profit cash in hand is the rental income, worth 20% more than it was.
Speaking of the mortgage, you will no doubt be getting a mortgage from a bank in Hungary in EUR and since the rent will be paid by the tenant the concerns you have raised are not too worrying.
Property Depreciation? No - I think not since there was only a tiny margin between build cost and sale cost before this credit crunch. What we are seeing at the moment is the wide spread shelving of new build projects because the developers can't get the finance to build these projects. Foreign demand for property has callapsed as people liquidate assets in foreign countries to pay for commitments at home (although Hungary is better placed than most - most of the ignorant speculators left Budapest several years ago - also no property bubble currently thus little if no downside to worry about). Rental demand for new build is exactly the same as it was (local people) - this statement will no doubt be look upon with disbelief by some on this forum. As will this next statement.
These new build apartments will continue to appreciate at the rate of inflation right through this credit crunch. Why? Because there is an ongoing huge cut in supply / big delay in big residential projects. Property is 20% less expensive in Budapest than any other major city in central Europe - prices will equilibriate one way or another, - partly property price falls elsewhere and maybe a nice rise in Budapest.
New build property in Budapest is easy to let if it is in the right location and is well furnished and priced correctly since the demand is there from local inhabitants.
What of the cost of furnishing? 10k Euro is what the management companies will charge for a good finish inc Kitchen - easy to let standard.
So in summary .... when weighing all the costs - legal fees, furnishing - likely selling fees, letting fees and parking etc etc etc. We are talking approx Euro 105k for a 1 bed apartment .... then consider that by then the £ = Euro likely parity. I will be very interested in the eventual evaluation, but the likely situation is that it will need to be let for a few years before it will be worth reselling to break even - assuming no capital appreciation since purchase (plan for the worst). Consider rental furnishings have a shelf life of 4-5 years. Rental income of 6% on actual value - in actual effect it is more due to currency effect and the fall of the pound, calculate the yield at the time we purchased then the 7% magic figure would be reached.
My reasons for purchasing in Hungary early 2007 were for the following reasons.
1. UK housing market was grossly over priced and due for the biggest correction ever 30% (average prices have already dropped 18% since last year) and prices will continue to fall for 2009.
2. Understanding of property and economic cycles. There is always a property boom followed by property crash and then recession. The boom period tends to last 14 years in the UK although it has been extended by foolish Brown. The down phase of the cycle then subsequent return to property appreciation will take 6 yrs until UK PLC has officially recovered and until prices return to 2007 levels. My general idea was to purchase somewhere that had already bottomed out - the inverse of the UK property cycle and thus not suffer the UK crash in value. I also exchanged all my £ into Euros prior to Northern Rock failure and diversified into Gold.
3. UK was inevitably going to enter a deflationary period that the UK gov would inflate our way out of = collapse in value of £, followed by massive inflation, whilst the HUF would likely strengthen vs Euro. Also - inflation is falling very fast in HU. So you could say it is a bit of currency speculation - which so far I have gotten correct until recently where the HUF has weakened again. I still think the HUF will strengthen to 235 vs Euro before EMU2 entry - its a long term play.
4. Return of growth to the Hungarian economy and with it falling unemployment and rising salaries is speculation at best, but I think it will come since Budapest has so much going for it, property appreciation over and above the rate of inflation will return 2010 onwards and in combination with HUF appreciation vs Euro it does in my book look like a good investment, especially when you look around and find that there are virtually no good investments to be had - not for the time being anyway. It is certainly a good place to have a apartment - if you purchased for personal reasons rather than investment purposes.
As to where we are in the property cycle when compared to Hungary - it is difficult to judge but my guess is that Hungary is recovering from the big spend - austerity measures etc. Now compare that to the UK - we are only just going into the big spend - pre inflationary period if not deflation still. So we are a good 4 yrs behind Hungary.
You can still get a mortgage in Hungary - I spent a good 2 hrs chatting to my mortgage advisor regarding the entire senario, - mortgages are more expensive than they were, if you are worried about the rent being insufficient to pay the mortgage put a little more into the pot .... take a 60% mortgage rather than 70%, just be aware that any more money you exchange into HUF you are going to take a nasty hit on exchange [broken link removed] however you also need to consider the performance of savings within the UK (dire to say the least).
Do you have a mortgage advisor in Budapest, if not I can recommend one. Whatever you do dont go for a mortgage less than 70% - the fees are nasty right now (there is only 1 company doing 80% mortgages at the moment and they charge 1.5% more for the privilage).