Budapest District VI Prices

G

Galwegian

Guest
Hi,


I bought an apartment in Budapest District VI in 2004. It is on Bajsky Zsilinsky - Not far from the Basicalla ( But on the district VI side of the street). The apartment faces onto O Street and it is a two bedroom 76 SQM apartment. It is fully furnished and currently rented for Eur 500 per month.

I heard that prices had dropped in Budapest in the last couple of years but I also heard that the triangle between Andrassy , Bajsky Zsilinsky and Terez Korut has seen high demand and increased prices in the last couple of years. Does anybody know about demand and prices in this area and does anybody have any idea how much my apartment is worth. The building is in good condition and the apartment itself was renovated about 6 years ago.
 
Hi Galwegian,

Based on what you've said, chances are that it's probably worth in or around the same as what you paid for it (no way of knowing for sure though, without knowing what you did pay for it).

In general, prices are lower for classic apartments across the city, but statistics can be misleading. A few years ago, investors bought every type of classic apartment, while now, investors in the second hand market tend to look for higher quality properties at lower prices. There is a massive oversupply of low quality classic properties and also an oversupply of overpriced second hand properties. At the same time, there is an undersupply of realistically-priced, good-quality classic apartments in central areas. One typical example is of bright, quiet, renovated 1.5 room apartments in good buildings in the best parts of Districts I, V and VI, priced around 15M HUF. These are almost impossible to find and when they come to the market, are usually sold within days.

The triangle between Bajcsy, Andrassy and the Korut was traditionally popular with Western investors in the early years of this decade and parts of it continue to be quite popular, but development in this area has been very slow. In particularly, certain streets like O utca, Lovag utca, Weiner Leo utca, Zichy Jeno utca are still very run-down and not that popular with either prospective tenants or buyers. The patch directly beside the opera house (particularly Hajos utca close to Andrassy ut, Kaldy Gyula utca and Dalszinhaz utca) is in a different category entirely and properly-priced, good-quality apartments continue to be in high demand in this area.

The other side of Andrassy around Paulay Ede utca/Szekely Mihaly utca/Kaldy Gyula utca has developed at a much faster pace over the last few years, helped along by the high-end new developments in this area.
 
I paid Euro 92,000 which may be a bit on the expensive side but at least I have it rented. I think realistically it will take seven to ten years for any significant growth in house prices in Budapest. If I could sell in 2014 for 180,000 Euro i would be happy. Do you think my aims are realistic? I am trying to mortgage this apartment now and hopefully buy another for 70-80,000 euro that needs some renovation work and plan to rent that for 400-500 Euro per month and hold for 7-10 years.
 
Medium to long term prospects in Budapest look good, but it all depends on what somebody paid for a property in the first place. You paid around 1200 euro psm in 2004, probably a bit too much for where it is, but not too far off beam either, assuming it's in good condition etc. I would say though that the apartment is worth not a lot more than that at this stage, so that with costs you would probably lose a little if you sold now. It is giving you around 8% however so its worth holding and waiting.

As regards to what it will be worth in 2014? Probably the best person to ask is a property salesman -- they seem to be able to tell the future much better than the rest of us! The truth is of course that nobody can tell, but if the improvements in public finances that were put in place in September bear fruit, we should all be fairly happy in 2014 or thereabouts.
 
Thanks guys for your insights. I think I will hold on for the long term.
 
Hello Galwegain,

In relation to your investment and investment in future, I would like to give a few pieces of additional informtion.

The apartment, which was renovated 6 years ago, probably needs to be refurbished again shortly. Further, furnishings might be changed min. once before you re-sale it. These extra costs may have negative impact on your cashflow from property investment in Budapest. If you intend to hold on for the long term, extra efforst should be placed otherwise you may have difficulties in finding a tenant.

Captial appreciation is another story. I expect you were told that 10-15% were normal growth here in Budapest. But it was not true in 2004 either. As a matter of facts, there has been no appreciation at all for years. What is more, we have seen slightly decreased prices in downtown. All in all, classic market is in an unfavourable situation. The way out will be long and slow. If Hungary does not introduce Euro until 2014, pessimistic view will be common in property market as well. Therefore, your expectation with regard to re-sale price might be far from reality.

The other issue is the fact of oversupply in downtown. It is better to know the followings:

- majority of residents are "nice age people"
- when they are died families try to sell "the new valuable property" immediately
- Hungarian families usually do not have money to invest into property, therefore, they want to get cash as soon as possible
- but their expectations are over the reality, so overpriced properties are waiting for new onwer in downtown

Back to prices, realistic price is not clarified yet. I mean it is difficult to specify it because it is easy to see cheap and expensive price but it is almost impossible to know what realistic price is:

- prices are mainly based on location in Budapest
- there are district prices, area prices, street prices, building prices
- whether the apartment is in good or bad condition, prices are not too far from each other
- quality and living standards are not really included in classic apartments' price because the most of them are below all normal living standards

If you expect to invest in Budapest again I strongly suggest you be very careful how to invest in.
 
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Hi All,
I too bought a property in district 6 .It is in sziv st. I paid 76000euro for it, 80m. It was renovated but the building is not in great condition. I have it rented at 400 a month. I do not want to hold it for 10 years. Would i get my money back if i sell now? I feel i could now invest the money better elsewhere. Will i pay capital gains tax and if so what is the rate?
I would like to get out but i feel i would take abig hit.
I would be interested to hear peoples comments
 
Hello pbrosnan

As far as I know you have an apartment in Sziv 50. Since the building is not nice at all, probably you get the same re-sale price(more or less but the apartment should be aveluated before start working on it). In this case, capital gains tax would not be an issue because you would not earn extra income. If you had a solid profit the followings need to be taken into consideration:

- Taxable base = purchasing price -(re-sale price + related direct costs*)
- CGT is 25%
- related direct costs should be proved by receipts
- *: legal charges, stamp duty, renovation if it has a value adding effect
- maintenance, furnishing cost cannot be deductable cost

Over 6 year ownership would give you extra deductable fixed 10% charges per year. I mean if you are the owner of the apartment for 10 years, for instance, 40% of your income from re-sale the apartment would be deductable cost. In your case, 2010 would be the first year when 10% extra deductable cost can be an issue.

I know you purchased the apartment in 2004 so you might be concerned with CGT if you had higher re-sale price than purchasing price with all related direct costs.

It is good to know that ownership is started when purchasing agreement is received by The Land Registry!
 
they have over built,over sold and over soiled in budapest.
your doing well to get 500e for your apt.
sit on it for 5 more years and see what happens, i nearly got stung myself,but in the end i kept my investments in ireland,and i reckon, im better of for it. lets support everybody else's economy,eccept our own,eh.
i bet you bought an apt in turkey aswell. "50k, i swear,50k,4 bedroom,yeah, 4 bedroom,bargin,for nothing,for nothing."
tossier.

scubockie.
 
galwegian, bear in mind that unlike the new build where there is a fixed price list for a project and each project can be compared with similar projects in the vicinity , when buying a re sale you may find a hugh difference in prices even inside the same building, some if it because the charecteristics of the apartment and in some cases becasue the owner does not understand the value and is asking for too much .
you are getting a good rent now and if you have renovated the electric system, heating and water piping you will only need a quick re painting of it before you would like to sell.
since there is a low supply of new built - if at all - in this area in the long run I believe you will see good value for money.
 
pbrosnan, unless you really need immediate access to the cash you've tied up in this apartment, it doesn't make economic sense to sell right now. You're making almost 6.5% gross, which isn't a bad return for a property which should increase in value once your building is renovated. I mentioned this before, but I think that this is something that you should really check out with your house manager. Classic apartments in run-down buildings are difficult to sell at the minute, but street-facing, renovated classic apartments with modern layouts in renovated classic buildings are much more difficult to find now in Bp and are often sold at a premium.
 
Heres a site I've been tracking for the past while.

According to this page, and my own records of it, the average sq.m price for Dis 6 has increased from €1,110 sq.m about 6-8 months ago, to €1,246 today, so possibly things are at least trying to go in the right direction. It flucuates a bit so the 10% increase illustrated here is very much taken at face-value. It includes Classic and New-builds and is based on actual sales.



can anyone vouch for its credibility?
 
Hi all,
I logged on to the site mentioned, glad to hear that maybe prices have at least stopped dropping. No i do not have any other property in Turkey etc. It is a pity that my first foreign property investment has turned out dicy to say the least, but that is life i suppose. I have learned some lessons. If i can keep renting i will take the posters advice and hold for another while at least.If the tenant were to leave that could spell financial trouble as i believe that the rental market is also fairly depressed at the moment. Lets hope for better days.
 
pbrosnan, bear in mind that - real estate is not always a short time investment, sometime it is wise to hold for long time, if you bought the apartment as a private person you can (and may I say should) refinance the property you can get up to 70% LTV from Hungarian bank, if you will match the payment to the rent you will be able to withdraw most of the equity invested. if you have problem with the tenant you might as well check alternative rental and management agents, the good one will always have many tenants lined up
 
Hi Lee-m
That is an interesting suggestion.Can you outline exactly how your suggestion works in practice? What is the rate of interest in Hungary? Would i have to buy another property in Hungary to release the equity on the property i own there. I have an irish mortgage on the property already.
 
Hi pbrosnan,

You should be able to get Euro mortgages in Budapest from several of the major banks (I found CIB to be quite good, but slow - 0036-1-[FONT=Verdana, Arial, Helvetica]423-2537[/FONT], [FONT=Verdana, Arial, Helvetica]Orsolya Busay[/FONT]) - typically around 0.5%-1% higher than in Ireland, but usually with discounted rates for the first year or two. It is a drawn-out process and you'll have to travel over here and provide evidence of earnings, etc, but it should be possible to secure a mortgage for 65-70% of the value of your property. Mortgage handling fee of 1-2% also needs to be paid when you first take out the loan.

You could also shop around or get a broker to do the legwork for you - [broken link removed] seem quite good.
 

Since when was property a short term investment? Anyone will advise you that you need a strategy of from 7 to 10 years before you buy. There can be some notable exceptions, when you "flip" a property in a fast-rising market for instance, but normally if you want to chop and change like that you should play the stock market and avoid property.

That particular property seems to be doing ok, why would you want to get out now when the medium to long term outlook is good?
 
hi All,
Thanks for the advice. I like the idea of sweating the asset by means of equity release if it is not advisable for me to sell the property at the present time.Would the equity release payments be on acapital and interest basis? Currently i have a 10 year interest only mortgage. The rent just about covers the repayments. I would need at least a 20 years capital and interest mortgage or i will have to dip into my own pocket to make the repayments. Can i claim mortgage interest relief against my tax bill?
 
 
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