Budapest District 11

[Danno]

HI - I understand that this area is about to see some major regeneration and is being compared to Canary Wharf 10 years ago...
Can anyone comment on this?
Also, would 115,000 Euros for a 1 bed apartment in District 11 be considered reasonable (with underground parking)

 

[Madangan]

I have no answer to your question but as far as I know District XI is quite large so you might get a more accurate answer ( from those in the know)if you posted address details of the apartment you are looking at as well as size.. new build/old what floor etc...
I bought( off plan ) in 2005 (which I think was /is considered to be at the top of the market) a 1 bed plus parking in District XI for €100,000 and right now I really doubt if its worth that. While it would be nice to think that I didnt buy at top and that my apartment was definitely still worth what I paid nonetheless as I am there for the medium/long term its not too bad. IF i had been trying to flip the place quickly or if I needed to sell now I might be singing a different tune. My place was completed in 2006 and has been rented out since end 2006

 

[Danno]

Apparently there is a new metro link due for completion end 2009 and with its proximity to Tivalti Harbour re-development area, IBM ofices etc etc, it certainly sounds promising
Are you familair with the rental market in Budapest? 1 beds are obviously a preferred otion to a studio, but are there enough people that can afford 1 bed apartments. The reason I ask, is that there seems to be an abundance of studios which might indicate that affordability will only stretch that far
Thanks

 

[UrbanDev]

HI - I understand that this area is about to see some major regeneration and is being compared to Canary Wharf 10 years ago...

There are 23 districts in Budapest that are compared to Canary Wharf by local & foreign agents

Ujbudada was once the district where the rich & famous used to live, but now it looks quite depressing. But it's getting better!
Over the last years, there was a lot of new construction - with Infopark on the riverside (home for several hi-tech multinationals) and quite some new builds (apartments and shops).
Also cool: Budaörs with all its shops is very nearby. And of course the new metro 4 will be a big plus!
Is the property you are looking at within the inner ring?

 

[budapest]

8% is a typical return for a new build in Budapest, if furnished very well and located in a nice area. I'm not convinced that this is possible in a development such as the one you mentioned. You'd need to be getting 770 euro per month on the example you used of a 115,000 euro one bed apartment. This seems unlikely in that location in the current market.

 

[UrbanDev]

8% is a typical return for a new build in Budapest, if furnished very well and located in a nice area. I'm not convinced that this is possible in a development such as the one you mentioned. You'd need to be getting 770 euro per month on the example you used of a 115,000 euro one bed apartment. This seems unlikely in that location in the current market.

770 € is 2 months of wage for a local, so unleas you find an expat or company to pay, no way you will get this amount for a 1-bed.

 

[budapest]

I agree, UrbanDev, an expat or company would be the most likely tenant at this price, but apparently there are 150,000 of us living permanently in Budapest!

I often wonder about the statistics of what people supposedly earn in Budapest vs. what they actually earn (including earnings from the 'grey' economy). I think 400 euro/month is what e.g. metro inspectors earn, but the younger professionals I know seem to start their first job on around 700 euro per month. Anyone I know in the middle or top of their career seems to earn 70-100% of what they would get in Western Europe.

 

[UrbanDev]

I often wonder too about the statistics of what people supposedly earn in Budapest vs. what they actually earn (including earnings from the 'grey' economy). I think 400 euro/month is what e.g. metro inspectors earn, but the younger professionals I know seem to start their first job on around 700 euro per month. Anyone in the middle or top of their career seems to earn almost the same as they would in Western Europe.

The grey economy is definitely huge, lots of people have 2nd jobs or some small business on the sides to make a decent living.

I know a few HR managers in BP working for multinationals, and reality is that middle management earns only 30-50% of wages in Germany.

From what I see, people with a normal income have really hard times for the moment. Supermarkets and shopping malls are full of people, but if I look at their carts, they barely buy something (or they buy plenty, but all cheap stuff).
At the other hand there's a new class of BPups with plenty of money. If you look at the cars - you could think it's Dallas. In my street alone (Lechner Odon), you can easily count 5 Hummers on a workday
A lot of the restaurants are full, even on weekdays. If you go to Pandorf or Vienna, the shops are full with Hungarians. And there's plenty of examples like this.
So yes - there's money (just not enough for everyone...)

 

[Madangan]

8% is a typical return for a new build in Budapest, if furnished very well and located in a nice area. I'm not convinced that this is possible in a development such as the one you mentioned. You'd need to be getting 770 euro per month on the example you used of a 115,000 euro one bed apartment. This seems unlikely in that location in the current market.

just curious as to how you calculate this % return i.e the rent as a percentage of purchase price of apartment plus car space or as a percentage of something else. The reason I ask is I recall athread on AAM several months ago which basically indicated that there were many different ways of calculating yields i.e no agreed formula so really (especially in the hands of agents) rental yield could be anything a person decides to base it on,

Also I am surprised at it being 8% as that seems a lot higher than I have seen mentioned in connection with Budapest for a while. (I wish I was getting 8%)

 

[budapest]

I know what you mean, UrbanDev. due to the brutal tax regime, most people absolutely have some financial difficulties, but I don't think it's as bad as statistics show. Hungarians tend to like to complain and don't always have a good reason to do so. As you mentioned, they also tend to quite thrifty and like to save or invest in larger purchases rather than spend on everyday things (like food!) In Hungary, for example, the average piece of furniture is used for 25 years (highest in the EU). In the EU as a whole, the average is 6 years!

Mandangan, I guess the typical way to calculate gross return is to multiply the rent by 12 and divide by the purchase price. Based on this calculation, 7-8% is what I would look for at the minute on a new build.

 

[Madangan]

Apparently there is a new metro link due for completion end 2009 and with its proximity to Tivalti Harbour re-development area, IBM ofices etc etc, it certainly sounds promising
Are you familair with the rental market in Budapest? 1 beds are obviously a preferred otion to a studio, but are there enough people that can afford 1 bed apartments. The reason I ask, is that there seems to be an abundance of studios which might indicate that affordability will only stretch that far
Thanks

The metro is being built but I hope it does not get completed in 2009 as my tenant is an expat engineer working on the project and I want him to be stuck in Bp for years paying me rent.

 

[UrbanDev]

The metro is being built but I hope it does not get completed in 2009 as my tenant is an expat engineer working on the project and I want him to be stuck in Bp for years paying me rent.

After Metro 4, there's always Metro 5

The HÉV lines are planned to become integrated into the metro network. The Szentendre, Ráckeve and Csepel lines are slated to be merged into what is called the metro line 5 (North-South Regional rapid railway). The connection will be made by an underground line between the Kaszásdűlő and Lágymányosi bridge stations, and extended in order to reach the center of Pesterzsébet.

 

[asdfg]

Mandangan, I guess the typical way to calculate gross return is to multiply the rent by 12 and divide by the purchase price. Based on this calculation, 7-8% is what I would look for at the minute for a new build investment.

Here we go again another calculation
How about this one?

Annual Rent less letting exps taxes etc. i.e. actual amount in Euro
Purchase Price should include furniture taxes legal exps etc. i.e. total cost in Euro
So the calc would be Annual rent less letting exps taxes (Hunguary and Ireland) in Euro divided by Purchase Price including furniture taxes paid to purchases the property, legal exps etc. i.e. total cost in Euro

 

[Dodala]

I do not think you can make 7-8% on rent alone, but also by the value increase of the property, which should normally happen as Hungary is lagging behind Prague, Bratislava and Warsaw in prices. The ww redit crisis does certainly not help this to happen....

I just purchased a 68 sqm apt in Budapest and the way the developer designed the bedrooms (2) and the living room is just making all of the three so tiny that the rooms can not serve the purpose unless you rent it to a cat family. This is an off the plan project, so I can make it a one bedroom and spacious living room project, but the developer said this way I lower the value of the property by reducing the number of rooms. So this is the real dilema: I tried to get a statistic on expats living in Budapest to find out if they are mostly single or a couple, maybe with a small baby. This setup could serve them. With one/two bigger child, it is already out of question. But if I leave the small living room like this, my future tenant may turn around just after entering this joke. Can you help me with suggestions?

 

[budapest]

You can definitely make a 7-8% return on new builds in Budapest, if you purchase in the right location at the right price and furnish well.

Where is the 68sqm apartment, Dodala? Expats in Budapest tend to be mostly younger, comparatively wealthier professionals, who prefer to live in prestigious parts of Pest, close to the action. The other major category is high-earning families who prefer to live in Buda (mainly Districts II, XII) in a very spacious apartment or house. Generally speaking, expats with children almost always prefer to live in Buda.

 

[Dodala]

Thanks for the reply, the apartment is in the new development in district VIII, called Corvin project. I know the district is a ban for foreigners now, but they creating a new city centre with shopping mall, gym and offices and lots of restaurants alongside of a wide pedestrian zone. So do you think it is OK to let one bedroom and a spacious living room?

 

[UrbanDev]

Thanks for the reply, the apartment is in the new development in district VIII, called Corvin project. I know the district is a ban for foreigners now, but they creating a new city centre with shopping mall, gym and offices and lots of restaurants alongside of a wide pedestrian zone. So do you think it is OK to let one bedroom and a spacious living room?

If the first law or real estate is 'Location, location, location', purchasing a flat in the Corvin Promenade project is like buying a place in Mad Max' Bartertown... a kind of artificial oasis in a dangerous, urban desert.
The 'Corvin Promendade' is situated in what used to be the poorest part of district VIII (before bulldozers took all the ruined buildings to the ground), itself a poverty-stricken section of Budapest. Ethnic segregation has ensured that Roma make up a visibly high proportion of the population.
The Corvin neighbourhood embodies all the problems a decayed inner city usually faces: deep poverty, high unemployment coupled with low education, poor living conditions, decaying public services, and poor public safety.

Concerning the restaurants and shops, don't believe what you see in the brochures - you should know better! Budapest developers all use the same 3D company, and these guys love to designs fantastic fashion stores and fabulous sushi restaurants - when reality is there will be a crappy ABC and if you're lucky some lousy pizza/pitta tents.

 

[budapest]

UrbanDev, you're painting a rather bleak (but rather amusing because I can well imagine it!) version of what might well happen in this area.

Who knows what will happen in a development like this? Almost all of the important variables are unknown, yet the price of this development is not cheap by any stretch of the imagination.

In my opinion, what is likely is that prestigious restaurants and shops will go nowhere near the Corvin Promenade. High-end retailers won't even set up on Vaci utca, much less District VIII! The entire Korut is still a no-go area for most Western retailers and restaurants. If you could drop into the Corvin Project from the air, that would be one thing, but at the minute, it seems more likely that you would have to enter it from either of the main entrances at Klinikak or Ferenc Korut.

Further to this, upper-end restaurants are likely to continue to locate themselves alongside the new Gucci, Burberry, etc. on Andrassy Ut or in or close to other similarly prestigious areas of the city. Why would they take the risk of setting up in a high-rise, office-centred block in VIII.

I agree with UrbanDev, Dodala. Forget the 3D rendering. Ask the developer what retailers and restaurants they have signed up. What businesses will locate here?

 

[UrbanDev]

I don't wanna sound like a doom-teller, and I've been plenty of times in this area at night when the West Balkan was still open. Always glad there were cabs upfront...
It's like you say: as long as they don't organize an air corridor, you are stuck in a ghetto.
Concerning the luxury shops and upper-end resto's: I can not imagine that something like that would happen - even a Mango or Leroy seems already a crazy idea at this point (unless these guys start a kind of wellfare 'shoplift & eat' project for the local bums).