Re: First Time Investor...thinking about Hungary!
Budapest is a lovely city (I was there for a week last year)and on the surface looks good for an economic renaissance, but if you are investing in property there you will need to consider it carefully.
A few points to ponder:
1. You will need to make your own decision about the Budapest's and Hungary's own economic prospects - factors such as:
- demographic trends, trends in the education system, attractiveness for inward investment and tourism.
- the Hungarian Govt's public finances and tax policies - can they afford to reduce taxes to stimulate economic activity?
- availability and demand for labour
- the incidence of poverty (some of the things you see around Moskva Ter and the seedier side of the Inner Ring Road would open your eyes) If poverty is a big problem in Budapest, it will swallow govt resources and tax revenues for decades, while discouraging foreign investment.
- inflation, the stability of their currency and the risk of currency devaluation
- is Hungary's economy vulnerable to any continued decline in the German or wider EU economies? To where do Hungary export their goods? Are these markets stable?
2. You will need to look at the property market over there
- Are Hungarians themselves investing? If not, why not?
- What are the average rents (when I was there I read in some of the expat-oriented papers that rents were indeed very low except for select properties aimed at expat professionals, diplomats etc
- Is the market currently being driven by actual returns or by hopeful outside investors?
- How would their systems for income tax, capital gains, Stamp Duty, rates and other levies impact on your investment?
- What will be the impact of their legal system on your investment?
- What development policies are in place? For example the existence of grants or tax breaks to Hungarians to revitalise certain areas or types of property might increase or devalue your own property.
3. Consider the specific location very very carefully.
- Is it on the tram or metro lines? (the trams are especially convenient in central Budapest and I would imagine it would be a huge help to be 100m-200m from a tram stop)
- What is the neighbourhood like?
- Is traffic congestion a problem in that area? (we saw a lot of traffic jams when we were there)
- Proximity to mainline rail stations and shopping centres would also be big pluses.
4. Finally, if you are thinking of investing over there, I suggest you should learn the local language and spend a week or two over there sussing everything out for yourself.
Don't confine yourself to agencies who cater for foreign investors -they are likely to tell you all the positive news while supressing all the negatives. Remember they are in for a hefty commission at your expense, if you buy through them. Talk to the agencies who deal with Hungarians. Read the ads in the papers over there and make up your own mind.
And most of all, best of luck!