Are Budapest developers still ripping foreigners off?

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ringledman

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Hi,

When I was out in Budapest in 2006 there was a clear overpricing of Budapest developments to the Brits/ Irish against the price charged to locals. i.e euros to us at 20% more than the locals Forint price.

Does this practice still go on? I heard that developers are starting to realise that this is putting off foreign purchasers with the lack of transparency and looking to have one price like that found elsewhere in CEE.

Any idea? I personally don't know one ethical developer in the whole place. Anything to add?

Cheers.
 
ringledman said:
Are Budapest Developers still ripping foreigners off?
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Although the (international) media have ceased to beat the drums for fraud cases in Budapest, many investors remain interested in the answer to your question.
There are certainly ethical developers in the place, and some decent agents.
Like there's also a fair number of unscrupulous rip-off artists who use the most misleading practices to sell the most depressing projects in the worst neighbourhoods at the highest price. Their weapon of choice is some smalltalk and a glossy brochure.

Why should they care? In the end they always walk away unscathed... with their 6%.
 
I haven't seen any real evidence of a dual price structure over the past couple of years. Although it took place in the past, in my experience, it was a very minor element of the Budapest market.
 
In some cases, there may be important differences, and not only due to € conversion. This summer a German friend requested the price for a classical apartment near Andrassy. When I asked a local friend a few days later to call for the same property, the price was 4,5M HUF less (+/- 10%).

This is only an example from my own experience. Private individuals and investors wanting to gain an exact picture of the market will find it very difficult to acquire factual numbers as the Excise Office (Illeték Hivatal) does not reveal such information to “non-professionals”.
 
EkaterinaML said:
Here you can see a post on Digg about BIF, a Budapest Developer.
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I live in this property (Castrum Haz). Some of the pictures on this site are even taken from my flickr page, others from skyscrapercity.com
It's all sad but true. The problem is that BIF was under huge financial pressure to finish the building, and did not take the time to finish it well.

Budapesti Ingatlan Hasznositasi es Fejlesztesi Nyrt. Reports Earnings Results for the First Half of 2007
08/29/2007
Budapesti Ingatlan Hasznositasi es Fejlesztesi Nyrt. reported earnings results for the first half of 2007. For the period, the company reported net profit of HUF 800 million, turning around a loss of HUF 49 million in the base period, helped by the completion of a large riverside real estate project. The significant improvement was due to the completion of the flats in the Castrum Haz property built by the company. This helped revenues rise 258% year on year (y/y) to HUF 3.04 billion, including HUF 1.9 billion from the sale of the flats. Operating profit increased almost fivefold to HUF 988 million. This was supplemented by a HUF 33 million financial profit, compared to a HUF 232 million loss in the base period.
Source: Businessweek
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As the owners prepare a lawsuit against BIF, it's hard to give any more details now, but the fact is that BIF is becoming very nervous. Yesterday a neighbour told me that the BIF manager Nemeth Gabor was fired. So we'll see what comes next.

I don't think this is what ringledman meant with ripp-off, but to hand-over buidlings that are far from finished happens a lot in BP.
If you look to projects as Palazzo Dorottya, Mill Lofts, ... today and you know that 1/ hand-over is planned in a few months 2/ that if the deadline is not reached the developper will have to pay penalties, you can be sure that the future owners will have some surprises!
 
UrbanDev said:
This summer a German friend requested the price for a classical apartment near Andrassy. When I asked a local friend a few days later to call for the same property, the price was 4,5M HUF less (+/- 10%).
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It's certainly true that a small minority of agents and sellers in the second-hand market in Budapest might ask for different prices from different buyers but the final selling price is the important figure. This just means you have to have your wits about you when buying. In addition to this, asking prices can often fluctuate depending on buyer interest, Euro exchange rate, recent news about the building or location, etc.

Finally, it's not really a rip-off if foreigners are willing to pay more than a local would.
 
budapest said:
Finally, it's not really a rip-off if foreigners are willing to pay more than a local would.
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In the case of my friend: true. He has the means and contacts to inform him well and decide on purchase only after considering all the factors & info he collected (BTW, he didn't buy in Budapest).

But in other cases, especially with 'weak consumers', IT'S a rip-off.
Have a look at the BBC program about MRI (thanks, Black Mariah!);
those people are not really willing to be ripped off.

Part 1 http://www.youtube.com/watch?v=YMWpnjzIcWo
Part 2 http://www.youtube.com/watch?v=gtlZZTRKGDc
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I agree, UrbanDev. Weak consumers can be misinformed and make poor investments based on inaccurate information. Nobody should invest anywhere without extensive research first. In my experience, it seems to be those 'investors' who buy off-plan, new-build apartments at an overseas property exhibition to be the laziest in terms of researching the market.

In terms of second hand property, Budapest is such a complicated market that the true value of property is often difficult to gauge. It really hasn't reached a stage where values are totally logical or transparent. Western investors can sometimes value a spectacular view or building design more highly than a local would. Estate agents know this and (more so in the past than now) use this knowledge as a way of getting higher prices for the sellers who pay them. So in my opinion, no deception is really involved if the purchaser believes that a property is worth the full asking price when a local would ask for a 3M reduction.
 
budapest said:
Finally, it's not really a rip-off if foreigners are willing to pay more than a local would.
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Are you telling us that foreigners willingly and knowingly pay more for these places than locals? I find that extraordinary.
 
In the central districts of Budapest and particularly with those properties aimed at foreign investors and marketed by the bigger international agents, the asking price can be higher than what a local would pay. Who is to say what the real value is though and whether a rip-off is taking place or not, if e.g. a Western investor is willing to pay a premium for a newly renovated apartment? Good apartments, which are renovated to a luxury standard are not easy to find in Bp and overseas investors/immigrants to the country sometimes pay over the odds to purchase something which fits all of their criteria and doesn't cause any of the usual headaches associated with renovation in a foreign country.
 
As a foreign investor in Budapest(on a small scale) I guess the answer really depends on your definition of rip off. I tend to agree with Budapest myself.

Equally if title to the thread was Are Irish Developers still ripping off irish buyers my answer would be yes but not as much as before as the market has changed here. It would still be yes as the number of badly built apartments in Ireland shows...including those bought by my own clients and subsequently shown not to be up to the minimum standards for insulation,sound proofing, plumbing etc...

I know thats off the actual thread but only to make the point that my experience in Budapest led me to tell many people(before I found AAM) how impressive polite professional etc...and honest I found the Hungarians in comparison to my extensive experience with Irish developers estate agents and management companies. I guess I got lucky. If I paid over the odds (and I may well have)then is that not my fault for not researching properly?? Anyway the hardsell was put on me by irish estate agents involved with the property not by the actual hungarians.

Just my view based on my one experience in Budapest. I appreciate that many people did not share my positive experience with their agents etc... in Budapest.
 
budapest said:
In the central districts of Budapest and particularly with those properties aimed at foreign investors and marketed by the bigger international agents, the asking price can be higher than what a local would pay. Who is to say what the real value is though and whether a rip-off is taking place or not, if e.g. a Western investor is willing to pay a premium for a newly renovated apartment? Good apartments, which are renovated to a luxury standard are not easy to find in Bp and overseas investors/immigrants to the country sometimes pay over the odds to purchase something which fits all of their criteria and doesn't cause any of the usual headaches associated with renovation in a foreign country.
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Budapest I think you've missed my point.

I asked Elephant developers and one other (forget their name) to be able to pay their advertised forint price off their website which was written in Hungarian. The price advertised in Euro's was on the English section of the website and was a good 25% more.

Forget about currency fluctuations they were there with one aim to charge more to the foreign buyers.

Anyway the reply I got was the euro price and that they offered a good service to their foreign purchasers.

They need to get with the times and have a transparent market place otherwise foreign investors will move on elsewhere.

P.S. they removed all the Forint prices off the Hungarian section of their website the next day! Now it says something like 'price on application'. The euro prices still remain for those of us who like to pay a hefty premium against the market.
 
Ringledman, the discussion has changed a bit since the first post but of course your initial point about certain developers not allowing foreigners to pay in HUF suggests a total rip-off. Thankfully this attitude is not common over here and I haven't seen evidence for it in a long time. I don't think it's any more likely that investors will get shafted here than anywhere else.
 
ringledman said:
They need to get with the times and have a transparent market place otherwise foreign investors will move on elsewhere.
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The Hungarian real estate sector needs to get with the times for everything: not only sales, but also services, positioning and marketing.
To sell yourself as a Champion's League topper, while your level and skills are more like those of a 3rd division player, is also a form of ripp-of.

I bought in Budapest, and I know that in the long term I will do fine - but in the meantime I see a lot of investors I know come to BP & run away asap...
(actually they stay & have a great party time). But to invest in BP? Nah!

PS: The only ones who seem to keep their trust in BP are the Spanish & Irish investors. Or they know something my Belgian / Dutch / German / Swiss / US / ... friends are not aware of, or it must be the BP Rio girls ;)
 
The international real estate companies are certainly less than convincing but some of them have repositioned themselves since 2004. Casaro now seems to concentrate on developing rather than selling overpriced classic properties. A1 has remarketed itself with lower asking prices. DH has gotten bigger but still sells the properties, which locals aren't really interested in, at higher prices.

If you deal with smaller Hungarian agents, the approach is much different. Prices are more realistic and better apartments are available, primarily because the sales commissions of these companies are much lower. Local agencies tend to have more properties, which Hungarians want to buy. The example I usually refer to is the market for well-laid out and positioned (bright, quiet, good aspect, etc.) one and a half room apartments in the better parts of Districts V and VI. This market is very strong locally around the 13M-15M mark, but it also suits investors who can rent these properties very easily to get a 7-8% return. However, few international investors end up going down this route.

You're right, UrbanDev, that Belgians, Swiss, Dutch, etc. are, typically speaking, not interested in investing in the Budapest market. However, these countries are not as fanatic about property ownership as Irish, UK, Spanish and Hungarian buyers tend to be!
 
This is an odd survey and I'm not sure how they categorise 'fast' or 'slow'. Bp is obviously one of the most developing capital cities in Europe with high FDI, etc, but a quick glance at its fundamental statistics gives the opposite impression. Relying on these statistics doesn't really offer much in terms of insight. Low GDP growth, high inflation, etc are temporary problems, mainly caused by an austerity programme, which other CEE countries in this region may also have to undertake in the near future.

Consistently getting around 7% return with good potential for future growth is not easy to find in most other Western or Western-style capital cities in Europe as far as I can see.
 
budapest said:
This is an odd survey...
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This is not about real estate!
Fast Company is one of the coolest business magazines around, and quite objective (+ always with a twist).

If you read one good magazine this month, make it ... ;)
 
I came accross this speech by US ambassador George H. Walker (June 28, 2006):
We are increasingly concerned about the lack of transparency in Hungary. A recent study by Freedom House indicated that only 10% of the procurement actions are free of improper manipulations. Ten percent! Relative to other countries in another study, Hungary's transparency problems are getting worse, not better. If the government does not address this persistent problem, foreign investment in Hungary will diminish and some industry will exit Hungary for other countries where corruption is not such an issue as here.
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