Budapest District 4 - Rental prospects

K

kp1

Guest
Does anyone know what the rental income prospect is for District 4 in Budapest in general?
thanks.
 
This are the figures I have for District IV. Overall vacancy rates in District IV are on the rise (18.25% for offices and an estimated 20% for apartments - I suppose partly due to all the new projects poppin' up and not rented out yet).

I've found this post by BP Propertyfinder helpful as well (info for BP, not for District IV only).

RENTAL YIELDS IN BUDAPEST are currently around 5-7%, but good location is a must! 6% and above is considered good. A guaranteed rental return simply does not exist!

EXPENSES
a) Agency fee: 10-12 % of the first year's rent plus 20% VAT, paid upon signing the
tenancy contract.
b) Management fees: 10 to 12 % plus 20% VAT of the annual rental income.
c) Annual personal taxes on rental income as follows:
If the apartment is owned privately (not by a company), then the tax is 20% of the rental
income when renting a residential property to an individual or a business.
Foreign nationals must apply for a tax ID and issue invoices to the tenant.
Click to expand...
 
We have an Apt in District V (Vadesz 28) and the rental income was guaranteed for the first 3 years and the return was 6% however, the 3 years are up and the rental return is now down to 4% approx, that's a drop of around one third for us.

We were in a situation where this Apt was paying for itself but now it looks like we will have to start funding the extra ourselves.

This not ideal so we might look at tryng to sell this Apt in 2009. prices at the moment seem to be low at the moment in Budapest, but it looks like with the Irish and English economies going through a rough patch at the moment it would be hard selling in 2008 anyway, not sure if Hungarian locals are buying ??
 
mocky-Dower said:
We have an Apt in District V (Vadesz 28) and the rental income was guaranteed for the first 3 years and the return was 6% however, the 3 years are up and the rental return is now down to 4% approx, that's a drop of around one third for us.

We were in a situation where this Apt was paying for itself but now it looks like we will have to start funding the extra ourselves.

This not ideal so we might look at tryng to sell this Apt in 2009. prices at the moment seem to be low at the moment in Budapest, but it looks like with the Irish and English economies going through a rough patch at the moment it would be hard selling in 2008 anyway, not sure if Hungarian locals are buying ??
Click to expand...

Mocky-dower, I suggest if the first 3 years were "guaranteed rental", then you've already bankrolled this yourself via the original property price. Typically, any "guaranteed" returns basically means a jacked up price on which you then get a partial "refund" on by means of the rental income.
 
mocky-Dower said:
it looks like with the Irish and English economies going through a rough patch at the moment it would be hard selling in 2008 anyway, not sure if Hungarian locals are buying ??
Click to expand...

Are you not aware that the Hungarian economy is going through a crisis right now that is far worse than than the "rough patch" being experienced in Ireland and the UK?
 
mocky-Dower said:
not sure if Hungarian locals are buying ??
Click to expand...

Hungarians are buying at the minute, but not in huge numbers. Unfortunately I don't foresee too many being interested in a development like Vadasz 28, which was sold to almost entirely Irish buyers around 2004 at quite inflated prices. A 4-5% return sounds about right for this project, based on initial sale prices.

UrbanDev, some of that information is incorrect, particularly in relation to tax to be paid on rental income. It is typically 25% of rent received by a private individual, but there's an alternative way of paying tax, where some deductions can be made.

kp1, to answer your initial query, District IV is a huge area with massive differences in rental potential. Instead, have a look at similar new developments in the area and ask rental agents how well they are performing.
 
budapest said:
Hungarians are buying at the minute, but not in huge numbers. Unfortunately I don't foresee too many being interested in a development like Vadasz 28, which was sold to almost entirely Irish buyers around 2004 at quite inflated prices. A 4-5% return sounds about right for this project, based on initial sale prices.
Click to expand...

Budapest,

what do you mean 'a development like Vadasz 28' I presume you and JJar are talking about the same thing i.e. because we bought this as a guarenteed rental property we paid over the odds for this !!

Its good to see that the Locals are buying because I reckon that the Irish and English buyers are slowing down as regards investing in oversees property, I stand corrected. Anyway I think that this investment has come to the end for us and has not woked out, I suppose that's the way the cookie crumbles. I know its bad timing but we will try and sell it, how do you reckon we'll get on price wise and how long to you think it would take ?

Oh by the way I made a mistake earlier - we had a guaranteed 2 year reant at approx 6% they now want us to move to another 2 years at approx 4% - we think that we should get more for an apt in District 5 but were not sure if we could get another letting agency - or even how to go about it.



Thanks,
 
Re: Budapest - Rental prospects for various new build projects in IV and V

As far as I remember, prices for the Vadasz 28 project were in the region of 4,000 euro per sqm around 2004. It does have exclusivity in that it's the only recently constructed building in District V, which brings certain benefits such as secure parking, renovated common areas, neighbours of a similar mind-set, etc. However, this project in particular seems to have been aimed solely at foreign investors at a time when everyone was buying whatever they could get in Budapest. In the current market, only reasonably-priced properties are selling, so it seems unlikely that another foreign buyer will be interested in your apartment at the minute (locals almost certainly won't). Although it's not exactly the same thing, to compare Vadasz with some other properties in District V, you can purchase a beautifully renovated apartment in a perfect building with a Danube view for significantly less than 4,000 euro per square metre. And less than 2,000 euro/sqm would get you all of this without the expensive view. Current luxury new developments such as the much superior Avenue Gardens on Andrassy Ut are also selling for around 4,000 euro/sqm.

Why do you think this investment has come to the end? Did you envisage selling within three years when you purchased? It is probably the worst time to sell this type of apartment at the minute.
 
Budapest,

What is the alternative way to pay tax where some deductions can be made. Would you mind briefly elaborating on this.

Many Thanks

J.
 
Personal Income Tax

For non-resident individuals owning and renting out Hungarian property, there are two possible routes of taxation:

Private Route #1:
Rental income is taxed separately from other income. The 25% tax rate is levied on the gross rental income, without any cost deduction.

Private Route #2:
The taxable income is computed by
  1. Deducting expenses actually incurred and documented in the renting process such as lighting, maintenance, administrative costs, etc.
  2. Or by deducting a 10% notional deduction from the gross income (10% expense ratio).
Net rent income is taxed at the following normal progressive rates:
Up to 1,700,000 HUF - 18% (+ 11%)
Over 1,700,000 HUF - 36% on band (+ 11%)

Source: Global Property Guide
(Although many of their facts are incorrect)
 
Thanks Budapest,

I think I have heard of the second option before, but it is a funny anomaly of Budapest that you get differing information from different accountants!

I will forward this onto my accountant and ask for her opinion.

Regards
 
I am considering a 1 bed property in Distrct XI - the growth potential over the next 5 years is being forecast as huge. Having read the posts above, hovere , it woudl appear that the rental market is not a s healthy as I am being led to believe. I have been forecast 8%
The development I mention is Velezda, District XI
 
If you are an agent, how hard is it to print a brochure where you promise 8%, 15% returns and even 15% or 25% capital growth? These percentages are just honey to a bee!
It's not difficult to make huge forecasts; not harder than to tell big lies...
 
I guess tax laws change so often that it's difficult to keep up. I've also had several instances of accountants giving me inaccurate information. It's always good to do a quick check yourself.
 
Don't forget that you also have to make a return to Irish Revenue. See [broken link removed] and "how are foreign rents taxed" and "Irish Tax implications of foreign property ownership" in particular.

You can offset the tax paid in Hungary against any liability due to Irish Revenue
 
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