Hungary abolishes HUF band

budapest said:
Today, the HUF broke the vital 240 barrier and is currently at 238.92. Good news for those who have already invested here.
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The strong forint makes it maybe a good time to sell, but not an easy one.

From what I hear, the international appeal to invest in BP has decreased a lot. Main investors came mostly from UK, Ireland and Spain, but with the global credit crunch (+ HUF currency appreciation), it's not the best of times to purchase overseas property.

BTW: interesting interview on portfolio.hu with Doug Hardman, CEE investment manager.

http://www.portfolio.hu/en/cikkek.tdp?k=4&i=15053
 
Yes, the huge international interest in Budapest has died down, but this happened in 2005. Since then, professional investors have continued to buy here, in smaller numbers and at more opportune prices. However, I think that even in 2008, it's not difficult to sell the right property in Budapest. There is huge demand in very specific pockets of the market. Foreign investors, who typically purchased the wrong type of property will find it more difficult of course.

In relation to the HUF appreciation, I was thinking in terms of it being good news for longer term investors as opposed to those who want to sell now. As the 240 barrier has been broken, it is possible that the HUF will appreciate further. For example, Goldman Sachs are predicting 225 within a year.
 
Hungary's Monetary Council is leaving the benchmark rate on hold at 8.50%.
I think it's good they've put the rate hike cycle on hold, so they have some time to oversee what could be the next steps.
So far, their primary solution to deal with the inflation problem was propping up the forint every time with a new rate hike.
Hopefully the Hungarian government will come up with some real solutions now.
 
The HUF will continue to appreciate since there is NO alternative to control inflation. Even if interest rates stay as they are at 8.50% the HUF will still appreciate for the forseeable future. If it doesnt appreciate, Hungary will be in a right mess with wage inflation running rampant.

The Monetary Council will be forced to raise rates.
 
UrbanDev said:
Hopefully the Hungarian government will come up with some real solutions now.
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I guess the government is somewhat paralysed at the minute and can do little more than raise interest rates to combat inflation. They are coming close to the end of what has been a successful austerity programme and the budget deficit is now back on track. No major economic changes will happen until this ends next year, after which a new tax regime will be introduced, probably increasing VAT and reducing personal income tax. If the HUF continues to appreciate in the meantime, then it's good news for Hungary and makes this entire process of economic recovery a lot easier.
 
Wow Budapest,

You are beginning to sound a little more optimistic - certainly more so than a year ago when I was posting my upbeat predictions (I was banned as a property puffer!).

As I see it, there is a convergence of factors that will result in Hungary / Budapest being a very good bet indeed!

The optimism will spread and will be reflected by the GKI sentiment index, when we see that surge upward, the retail sector will recover, then soon after property prices will follow upward.
 
I don't think I'm any more optimistic/pessimistic now than last year. I'm just cautious when it comes to vague, unsubstantiated statements, such as MaxIII's '2008 will be surprisingly good for Hungary' and 'Tourism WILL BOOM 2008'.
http://www.askaboutmoney.com/showthread.php?t=66397&page=2
Of course neither of these things turned out to be true. In fact, certain airlines such as Ryanair have scaled back their number of flights to Budapest.

From living here, you get a different perspective on the state of this country. Generally speaking, the foreign media have overreacted to Hungary on almost every occassion. From 2001-2004, it was 'the best place in Europe to invest with 20% capital appreciation', etc. Then in 2006, there was so much hyperbole written about the government lies scandal and the general state of the economy and how the entire country was in a shambles. In reality, it was a much better idea to invest in Budapest in 2006, than in 2003, but you'd never have realised this from reading anything in the foreign media. Now (less than two years after the supposed collapse of the economy!) that things are back on track, it seems equally untrue to gush about how amazing things will be here next year. I think it will be a much slower recovery process.
 
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Tourism will pickup nicely over the next 12 months, but the one thing that will kick things off will be the EMU 2 entry status, from that point on Hungary will boom despite its current weaknesses purely due to the inward flow of investment.

As for my statement 2008 will be surprisingly good ....... 2008 is only half over. Its a bit soon to judge me thinks!

Recent article on Portfolio suggests 2009 EMU 2 entry status to adopt currency post 2011 once inflation is down to 3% ish.

LOL .... that thread was good!

I especially like this post of mine ... http://www.askaboutmoney.com/showpost.php?p=510415&postcount=27 could it have been any closer to the mark!!

Note the date of that post!
 
Budapest ...... I would like your opinion on what currency to get my mortgage in for my second property in Hungary - thinking ahead (need to organise 70% mortgage in 6 months time for development completion Oct 09). Consider the continued strengthening of the HUF vs Euro and other currencies.

The real question is how far will the HUF strengthen vs Euro over the next 12 months! Several analysts are prediction 225 HUF to Euro ...... but in what time frame?

Consider inflation will fall hugely 2009 onwards and thus interest rates will fall.

I will also have another property rented out by then in Budapest, thus I have no worries about mortgage repayments.

Considering my situation ...... would it be better to do everything in HUF or Euro / other currency, rent / mortgage etc.

I have my own thoughts on the matter but would be interested in your thoughts considering your long time investment in the country.
 
Analysts are predicting 225 HUF - 1 Euro within a year. It's at 235 already and going in the right direction, so who knows how soon this might happen. (It took 6 business days to strengthen from 245 to 235).

In relation to getting a mortgage, the HUF is obviously not a possibility, due to interest rates. My preference has been for EUR mortgages, due to the fact that in the past, it was possible to agree rents in Euro and also more importantly, that EUR will be the local currency within a few years. However, more than likely, I will take out future mortgages in CHF as interest rates are much more favourable. It's an added risk of course, but assuming that the HUF stays under 250, it should be fine.

I would advertise rent in HUF, which suits both tenant and owner.
 
budapest said:
I would advertise rent in HUF, which suits both tenant and owner.
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Hi Buda, At present I am receiving rent in Euro should I insist on HUF (I'm not sure of the legalities involved in this) or would it matter as my client is German and is probably paying in Euros.
 
It depends what's written in your rental contract. In the past, it was more beneficial to get paid in Euro. Now, it's best for a landlord to get paid in HUF.
 
Hi

I have a question regarding Mortgage in EUR

By september next year I will have to pay the last 80% of my property with a mortgage. This will be aproximately 25000000 HUF which at the present EUR-HUF Exchange rate is 104000EUR but by september next year if the rate EUR-HUF drops to 225 it will be 111000EUR which is 7000EUR more.

The question is

Is it possible to lock the rate present rate EURHUF=138 with a company like worlfirst until I get the mortgage next year? Is this to risky? What are the issues regarding this??

Thank you
 
It should be possible to book a rate in advance by paying a deposit to a currency exchange company.

The risk is simple: If the HUF strengthens, then you've made the right decision and you save yourself some money. If it weakens, then you lose money.

Most analysts are predicting that the HUF will continue to increase, but of course, nobody can know this for sure and in the past, it has been rather an unpredictable currency.
 
At this point would it be a good idea to get a mortgage in CHF which has lower interest to pay for a property in Hungary ? or in EUR because the risk is lower because eventually Hungary will enter the EuroZone

I understand that EUR and CHZ are highly correlated so the exchange risks for EUR and CHZ mortgage is similar and anyway the HUF is apreciating against both currencies. So I guess is better to go for CHZ with the low interest for a 20 years mortgage specially if the first 5 years is an olnly interest mortgage

I will apreciate any comments on this

Thank you
 
I would recommend taking out a mortgage in EUR. I have two properties in Budapest and both leases are denominated in EUR, i.e. the tenant pays rent in EUR as opposed to HUF. CHF is a popular alternative for financing properties in Hungary because, as you say, interest rates are lower than EUR and significantly lower than HUF but as EUR is my home currency, my salary is in EUR, my rent received is in EUR, Hungary are looking to join the EUR(ozone), I'd prefer to have my mortgages denominated in EUR. Just my 2c. My only exposure to the HUF is that I paid for the properties in Forints; which has since appreciated by over 10%; who needs real capital appreciation ;-)
 
There are, as rekhib says, many solid reasons for EUR-based investors to take out loans in Euro. However, the EUR mortgages being offered in Hungary at the minute are just not very competitive - high interest rates, high handling charges, etc., which would typically mean final rates of close to 8%! CHF mortgages, while also a risk in terms of currency unknowns, are at least given with more competitive rates.

As an aside to this, if the HUF continues to stay strong, then I don't think it's a good idea for investors to continue to ask for their rent to be paid in EUR.
 
That is very true, when I was looking for finance in Hungary, CHF was certainly the most competitive currency. One thing to be aware of if you were going down the CHF route is that it is not traded nearly as heavily as the EUR and so it's inherently less stable. Also, CHF interest rates are far more "flexible" than EUR interest rates. What I mean is that if the SNB deem it appropriate to take the heat out of the Swiss economy they can increase interest rates and it will only affect the 7 million odd Swiss people and anybody who is exposed to the currency; this effect is minimal compared to the 500 million people (plus those with vested interests in the currency) that an ECB interest rate rise affects.

On the side note, in my lease agreements I have a HUF figure which is the actual rent and then it says that it can't fall below a certain amount in EUR which was based on the FX rate that day. This proved to be a good move when the HUF was heading for 270 to the EUR and it means that you can still avail of the upswing in the HUF. I paid extra when the lease agreements were being drawn up and seeing as the HUF has strengthened so much, in hindsight it's been a waste of money but still, it did give me peace of mind while the HUF was heading the other way.
 
I guess the main issue is that at the moment, there is no perfect way to borrow in Hungary. CHF mortgage rates are the lowest, but represent the highest currency risk. EUR mortgage rates are high, but at least the Euro is more connected with the local market, while HUF mortgages are extortionate and for the most part, never taken out anymore.

In relation to the main topic being discussed here, the HUF is now at an all-time high. It'll be interesting to see if it can break the 230 barrier this week (currently at 230.5).
 
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