Poland or Budapest - best possible capital appreciation & rental income?

T

Tommy K

Guest
Re: Property advice - Diarmuid Condon

Hi,
I am interested in purchasing property abroad possibly in Poland or Budapest. I have no experience of purchasing abroad!

Can someone advise of where is the best location with the best possible capital appreciation and rental income and also of any good Solicitor that has experience of this!

Cheers,
TK
 
Thanks a mil for the advise - in early stages of review process. Also looking at Bulgaria as possible location!
 
If buying a property in a foreign country you should be aware of the following:
1. Rental income stated if guaranteed may not be realised. The property is increased by the guarantee so in effect they are giving you back your money.
2. You will be liable to tax on the profit on foreign rental income in Ireland and you may also be liable to tax in foreign property.
3. When you sell the property you will be liable to CGT in Ireland and may be liable to similar tax in foreign country.
4. There may be problems with currency fluctuations
5. Is there a double taxation agreement with Ireland? If there is you may be able to off set the liability in foreign juristiction against the liability in Ireland. If not you will be liable in both juristictions.
6. You may have to do two computations in relation to your tax affairs. One for the Irish Authorities the other for foreign authorities. Remember it is up to you to make the necessary returns.
7. Any advise you get, get in writing. Ask them what qualification they have to give this advise. Are they tax expert in this area etc.
8. Ask about Inheritance rights. Can you leave the property to whoever you like. What taxes are payable?

 
Hi there

I was curious if you could help me understand your point number one from your post in referance to poland or budapest

"Rental income stated if guaranteed may not be realised. The property is increased by the guarantee so in effect they are giving you back your money"

Its an interesting point - and i am curious as to how it affects the overall profit and returns

Thanks in advance

vinnie
 
A friend of mine is involved in a company in Krakow that show you around and help you get sorted in buying,furnishing and renting a place.send me a PM and i can send on the web site if you are interested ... might be worth talking to
 


I think the point asdfg is making is - the developer jacks up the selling price so as to be able to cover the cost of paying the 'Guaranteed Rental income' , if the unit does not rent.

So in effect, you pay over the odds to buy the unit and the developer pays for any shortfall in the rental income, out of the purchase price that you paid.

Hence you are just getting your own money back, although it is even worse than this because now it is income and can be taxed accordingly.
 
Hi Guys Im new to this forum, just reading some old posts on budapest property and your member budapest seems very knowledgeable .I would very much like recomendations for english speaking lawyer.Which theard do I use for refub questions
 
The OP started the query re comparative values of investing in Poland or Budapest.

First thing that comes to mind is the attempt to make a compare/contrast evaluation of (a) an entire country against (b) a city in another country.

No reflection on the poster, but this just serves to show how foreign property is sold to irish buyers, or indeed more correctly how irish buyers approach the process. At one point in time the flavour of the month is Budapest, next month it's Bulgaria or Poland. Get my drift? A couple of years ago the perceived wisdom was that buying in Budapest (capital of Hungary, for the uninitiated) was the easy way to riches, and there was a rush to buy there, but often with no thought or strategy. Then the marketing-driven tide turned to Bulgaria, again with no logical approach by buyers. Now "Poland" seems to be the fashion, but again with no research and no logic in most cases -- almost all the available information is coming from marketing companies or second-hand from "a fellow I know down at the pub."

A proper comparison might be more correctly made between Warsaw and Budapest for instance, but nobody buys property in Warsaw it seems, just in "Poland"!

Forgive the deviation from the original question! Just sometimes someone needs to say "stop, hold on, what exactly are you thinking of doing with your money?"

To get back to the question, for my money Budapest wins out over most of the Polish cities (except for parts of Krakow maybe) in terms of potential investment value. Rent returns are reasonable enough, and some good projects give a fair return and seem set to grow in time. The city is well placed strategically and geographically in Europe, better than most Polish cities, and the fiscal rectitude programme of the current government will pay dividends in years to come in my humble view.

It goes without saying though that not all of Budapest makes for good investing, but there are rich enough seams for the canny buyer who knows his cities from his countries!
 
If you intend to invest in overseas property especially in Eastern Europe you would need set an investment strategy and make your objectives and goals clear. Without good strategy you can be easily ripped off or spoiled by sweet promises without facts. If you are not romantic and do not care with city itself and area where you invest in you should focus on financial facts and rational factors in investment startegy. You also need to use different aspects in research before making decision on overseas. I suggest you take the following into consideration:

1. Time component

- short term or long term potentials of residential and commercial property

For instance, different time scales can provide you different returns in different markets. Re-sale in 5 years or Re-sale in 10 years have more financial benefits for you. Hungary must be a long term investment while Poland may be a short term because Poland is a new market with higher potential of high appreciation(I do not know Poland property market but capital appreciation in Budapest is very low at the moment and no any improvement is expected in the next couple of years).

- prospectives in GROSS and NET yield and return

Money is above everything I mean you need accurate information about GROSS and NET yield and return for residential (new build, classic/second hand) and commercial property. At the moment higher gross yield (8-10) is achiveable for new build and 5-7 for classic in Budapest. Commercial properties provide avarage 8% gross yield.

Tax advice is essential before going into a business. With respect long-term tax advice is important because there is no property tax in Hungary at the moment but it will be a new tax from 2008!

2. Market risk and Outlook

Budapest is a complicated market. Extra paperwork and extra efforts need to be expected if you want to invest in as a professional. Rip-offs, paddy pricing, hidden costs in services, lost in translation are common here in Budapest. Poland can be a better place initially but market risk must be higher because new markets' mechanism are based on expectations such as high capital appreciation in short term for instance. (Prices were boosted in Hungary from 2000-2003 by which apartments became overpriced) With contrast, Budapest is now well-know to have low capital appreciation due to overpricing in that period. The other potential market is risk the vacancy time. If you are under pressure and you need positive cashflow from property investment as soon as possible, you should know which property market has lower vacancy rate. Reference to yields, residential and commercial property market should be invetigated in terms of vacancy time.

For instance, new build apartments have lower vacancy time than classic apartments even if classic apartments have prime location. There are some extrem cases but extrem cases should be elliminated from your statistics.

Finally, Hungarian and Polish Economy Outlook are based on expectations. But Poland is a better position than Hungary because Hungary has the worst macroeconomic performance between the 10 new EU countries from 2004. Further to that,Euro will not be introduced in Hungary sooner than 2013. Introduction of Euro will mean a new starting point for Hungarian econom. Outlook is important if you are a short term investor because re-sale potentials are significantly effected by buyers' attitude at that time. For instance, classic apartments sellers have now difficulties to find a buyer in Budapest due to unfavourable economic performance and political instability. This is the main reason why classic apartments' real price i lower than it was 3-4 years. But low price in this segment with solid capital appreciation in long be can be an alternative if you do not mind dealing with renovation and waiting min. 10-15 years.

3. After sale services and their costs

Purchasing an apartment is not the end but beginning of property investment. Purchasing price with legal costs and stamp duty are only one side of the coin. You need to find out property management service, accountant service, insurance cost, etc. You will find big differences between service charges and transparency in their services. Your yield is improved or get worst by unprofessional and or overpriced after sale services.

Last but not least, you can be concerned with language barriers. If you do not find any independent and reliable partner in the country you want to invest in, it does not make sense to go there. I strongly suggest you are looking for partners because local knowledge and proffesional experience are key supports in an investment strategy.

Best of luck with it
 
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