Irish and UK property investors giving up on Budapest, says estate agent [broken link removed] Written by Robert Hodgson Monday, 05 November 2007
The divisional head of TIPP Ingatlan, an estate agency with several branches in the capital, says foreign investors are looking for ways to get out of the Budapest property market.
In an interview published on real estate website ingatlanok.hu, Tamás Takács said that many foreign investors in Hungary are having difficulty finding tenants for properties they have bought in Budapest. This is particularly problematic for those who financed their purchases with a mortgage, which they are now having to repay from their own pockets.
To compound the woes of the investors, the bulk of which are Irish and UK citizens, they have seen little capital appreciation as average house prices have barely increased in real terms over the past three years. This is despite extravagant claims to the contrary that are regularly made by companies marketing Hungarian real estate to foreign investors.
The problem for disappointed investors who want to get out of the market, as Takács says, is finding a buyer who is willing to pay prices as high as HUF 500-600 thousand (EUR 1,989-2,387) per square metre.
Despite great interest from foreign investors and a profusion of large developments, the Budapest property market is still driven primarily by domestic demand. The more expensive newly built flats are generally aimed at foreign buyers, but sufficient demand from tenants for such expensive rental properties simply does not exist.
Large price rises occurred between 1999 and 2003 and saw many early investors sitting on properties whose value doubled or even quadrupled. This led to the stampede to invest in Budapest, especially around the time of Hungary joining the EU in 2004. By that time, unfortunately, most people had already missed the boat. Takács believes that the price rise was driven by domestic demand, with home buyers taking advantage of mortgages - a relative novelty at the time - and government subsidies.
Schemes that covered mortgage interest, as well as offering cash incentives to first time buyers, have been cut back in the current climate of economic austerity as the government fights to reign in a calamitous budget deficit. Domestic buyers are now looking for cheaper property tor holding back, which has led to a slowdown on the market.
“If we apply normal market rules, then in times of oversupply such as that prevalent on the current Budapest market, it can still be worth buying,” said Takács. However, an investor should only consider doing so at present if he is prepared to think of making a return over a longer term of around ten years, he concluded.
The divisional head of TIPP Ingatlan, an estate agency with several branches in the capital, says foreign investors are looking for ways to get out of the Budapest property market.
In an interview published on real estate website ingatlanok.hu, Tamás Takács said that many foreign investors in Hungary are having difficulty finding tenants for properties they have bought in Budapest. This is particularly problematic for those who financed their purchases with a mortgage, which they are now having to repay from their own pockets.
To compound the woes of the investors, the bulk of which are Irish and UK citizens, they have seen little capital appreciation as average house prices have barely increased in real terms over the past three years. This is despite extravagant claims to the contrary that are regularly made by companies marketing Hungarian real estate to foreign investors.
The problem for disappointed investors who want to get out of the market, as Takács says, is finding a buyer who is willing to pay prices as high as HUF 500-600 thousand (EUR 1,989-2,387) per square metre.
Despite great interest from foreign investors and a profusion of large developments, the Budapest property market is still driven primarily by domestic demand. The more expensive newly built flats are generally aimed at foreign buyers, but sufficient demand from tenants for such expensive rental properties simply does not exist.
Large price rises occurred between 1999 and 2003 and saw many early investors sitting on properties whose value doubled or even quadrupled. This led to the stampede to invest in Budapest, especially around the time of Hungary joining the EU in 2004. By that time, unfortunately, most people had already missed the boat. Takács believes that the price rise was driven by domestic demand, with home buyers taking advantage of mortgages - a relative novelty at the time - and government subsidies.
Schemes that covered mortgage interest, as well as offering cash incentives to first time buyers, have been cut back in the current climate of economic austerity as the government fights to reign in a calamitous budget deficit. Domestic buyers are now looking for cheaper property tor holding back, which has led to a slowdown on the market.
“If we apply normal market rules, then in times of oversupply such as that prevalent on the current Budapest market, it can still be worth buying,” said Takács. However, an investor should only consider doing so at present if he is prepared to think of making a return over a longer term of around ten years, he concluded.