Prices in Hungary (was part of post on Sunday Indo article)

M

MaxIII

Guest
There is a whole host of reasons why Hungary will do well over the next few years many reasons are due to the economy and structural changes. The EMU is just one factor that will play a part.

Why will Hungary do well?

1. No stupid lending.
2. Massive infastructure spending.
3. Stunning city - tourism on the increase.
4. Increasing awareness of attractions in terms of business due to location (borders 7 countries).
5. Strong banking sector.
6. Strong manufacturing center.
7. Removal of borders to EU citizens
8. Huge increase in costs for countries manufacturing in China = other destinations becoming more attractive including Hungary.
9. 2nd language is Russian and its main trading partners are Germany, Russia, China and Spain to a lesser extent.
10. LOW exposure to subprime situation and western debt based economies.
11. 2nd Sunniest City in Europe.
12. New traffic controls - reduce traffic by 40% in centre - combined with completion of new ring road.
13. Wage inflation 12% in private sector.

Feel free to add to this list.
 
Re: Foreign property dreams crash: dismal reading from today's Sunday Indo 21-10-07

MaxIII – I do not share your enthusiasm. Hungary has poor salaries compared to cost of living from property etc. This has been falsely inflated by oversea’s speculators. Hungary will never compete with China on wage structure - it is impossible. What major companies, generic to Hungary will take advantage of the growth story of India and China? Foreign companies may locate for national markets surrounding it but not international? Istbc though. Anyone buying in Budapest on a loan to value will have a minus net-cashflow to yield. Property is an expensive hobby. It's overvalued relative to other fundamentals i.e. local salaries. Are you involved in selling property in this market, it sounds like a sales patter you would get on a sales inspection trip?
 
Re: Foreign property dreams crash: dismal reading from today's Sunday Indo 21-10-07

9. 2nd language is Russian ?????????????

I think you'll find that this is the same with most Eastern Bloc countries, but mostly with those over the age of 35. So, what has that to do with its economic outlook??
 
Re: Foreign property dreams crash: dismal reading from today's Sunday Indo 21-10-07

gearoid said:
9. 2nd language is Russian ?????????????

I think you'll find that this is the same with most Eastern Bloc countries, but mostly with those over the age of 35. So, what has that to do with its economic outlook??
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And many of them learnt Russian in the same way that we learnt Irish - feeling of coercian/compulsion and poorly taught. I think you'll find that the general standard of Russian isn't that high, even though most eastern europeans (though not Hungarians, Romanians, Albanians or Baltic states) are Slavic, like the Russians, and all slavic languages have many lexical and gramatical similarities.
 
Re: Foreign property dreams crash: dismal reading from today's Sunday Indo 21-10-07

MichaelDes said:
Hungary has poor salaries compared to cost of living from property etc. Foreign companies may locate for national markets surrounding it but not international? Anyone buying in Budapest on a loan to value will have a minus net-cashflow to yield.
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The three points you make are misleading as Budapest, while statistically having quite a low average salary, is one of the wealthiest cities in Central/Eastern Europe. As I've stated before, general statistics in Budapest are almost always misleading. Many foreign 'investors' may have bought the wrong properties in the wrong locations at inflated prices, but local demand continues to be strong for the right properties in the right locations.

Foreign Direct Investment (mainly international companies locating here) per inhabitant is the highest in the region by quite a long way.

It's very possible to get a 7-8% return on your investment in Budapest if you choose your investment correctly. This gives a positive yield, not a negative one.

Putting Hungary in a club with Albania and Romania is very misleading. Secondly, not sure if it matters here, but Russian is by no means the second language in this region - perhaps 40 years ago, but now English is the second language and German a very distant third.
 
Re: Foreign property dreams crash: dismal reading from today's Sunday Indo 21-10-07

Russia is booming, countries that can grow along side have an advantage - language is an advantage.

China manufacturing costs have increased by 40% this year so far. This has not yet filtered through to the offical figures yet ...... but it will do.

Locals ARE BUYING - Corvin 70 -80% are local buyers - Hungarians from what I hear.
 
Re: Foreign property dreams crash: dismal reading from today's Sunday Indo 21-10-07

budapest said:
The three points you make are misleading as Budapest, while statistically having quite a low average salary, is one of the wealthiest cities in Central/Eastern Europe. As I've stated before, general statistics in Budapest are almost always misleading.

Foreign Direct Investment (mainly international companies locating here) per inhabitant is the highest in the region by quite a long way.

It's very possible to get a 7-8% return on your investment in Budapest if you choose your investment correctly. This gives a positive yield, not a negative one.
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What are Hungarian interest rates? How has the Hungarian Florint fared against the Euro in the past year? Do either of these 2 figures result in a positve yield set against a 7-8% return on your investment?

A 7-8% return means nothing without without knowing the true costs.
 
Re: Foreign property dreams crash: dismal reading from today's Sunday Indo 21-10-07

Howitzer said:
What are Hungarian interest rates? How has the Hungarian Florint fared against the Euro in the past year?
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It's true that if you borrow in HUF and invest in Hungary, your yield will be negative. However, as foreign investors typically either borrow EUR in their home country or CHF/EUR in Hungary, their annual yield is more likely to be positive. CHF mortgages are the most common over here as interest rates are extremely low - around 2%. The additional risk of borrowing in a different currency is obviously present, but most analysts don't foresee the HUF weakening anytime soon. However, it is something to take into consideration when investing here.

The exchange rate has hovered around 1 EUR=250 HUF for many years now. (The weakening of the currency due to last Summer's problems was temporary and it recovered very quickly afterwards.)
 
Re: Foreign property dreams crash: dismal reading from today's Sunday Indo 21-10-07

budapest said:
However, as foreign investors typically either borrow EUR in their home country or CHF/EUR in Hungary, their annual yield is more likely to be positive. CHF mortgages are the most common over here as interest rates are extremely low - around 2%.
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Isn't this an indication that the market is more or less formed by foreign investors rather than local demand? For any local they would therefore be making a loss on a day to day basis on what would appear to our Emerald tinted eyes to be a fabulous yield.

As I said, anyone making this kind of investment without a full grasp of the figures is setting themselves up for a fall.
 
Re: Foreign property dreams crash: dismal reading from today's Sunday Indo 21-10-07

There are not many foreign investors in Budapest at the minute. The market is primarily local-based. Even locals borrow mainly in CHF because of high HUF interest rates (7.5% base rate, the highest in EU at the minute as far as I know). It's a risk of course, but day-to-day savings make it worth it for most local buyers.
 
Re: Foreign property dreams crash: dismal reading from today's Sunday Indo 21-10-07

budapest said:
There are not many foreign investors in Budapest at the minute. The market is primarily local-based. Even locals borrow mainly in CHF because of high HUF interest rates (7.5% base rate, the highest in EU at the minute as far as I know). It's a risk of course, but day-to-day savings make it worth it.
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Buda, could you explain in laymans terms the difference between a CHF rate and a HUF rate and give an example of €100k interest only scenario. I would be curious to know and have no intentions of being snide but would like to know the dangers as well i.e. Forex exposures etc? I respect your valued knowledge in this marketplace as it runs contrary to many gifted-amateurs approach?
 
Re: Foreign property dreams crash: dismal reading from today's Sunday Indo 21-10-07

It's an area of concern in Budapest that locals are borrowing so heavily in foreign currency mortgages (mainly CHF) - approximately 80% according to recent figures. Who knows if the HUF will go up or down over the next few years. Most local analysts suggest that it will firm against the EUR and CHF (particularly if the trading band is ever scrapped), which is good news for those who borrow in CHF now and get paid in HUF as their monthly mortgage payments would theoretically go down. However, there is also a risk of course that the HUF will lose ground against the EUR/CHF and mortgage payments would increase for those locals earning HUF.

The reason people take the risk can be seen in the example you suggested:

A monthly payment for a mortgage of €100,000 (principal and interest) using today's rates, would cost approximately:
CHF (2.69% with IEB): €539.21
HUF (10.34% with IEB): €987.66
EUR (5% estimated): €659.96

A monthly payment for an interest-only mortgage would cost approximately:
CHF (2.69% with IEB): €224.17
HUF (10.34% with IEB): €861.67
EUR (5% estimated): €417
 
Re: Foreign property dreams crash: dismal reading from today's Sunday Indo 21-10-07

budapest said:
A monthly payment for a mortgage of €100,000 interest-only, using today's rates, would cost:
CHF (2.69% with IEB): €539.21
HUF (10.34% with IEB): €987.66
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Have you done the maths right?? CHF equates to 6.5% not 2.69% e.g.

[€100,000 x 0.0269]/12 = 224.16 per month

CHF you quote

539.12 x 12 = 6469.44 so Answer/ €100,000 = 0.065 or 6.5%

Maybe its a Monday and my brain has yet to kick in but 6.5% does not look attractive.:confused: Please correct me if I am wrong and there is more of an explantion to it?

P.S. if a CHF mortagage is 2.69% on a mortgage loan from Swiss bank in a different currency...then why not go for Yen at 0.5%, it seems just as sublime????
 
Re: Foreign property dreams crash: dismal reading from today's Sunday Indo 21-10-07

You're right, MichaelDes! I had calculated figures for Principal + Interest. I've updated them now in the earlier post.

Camry, it's not my proposal or recommendation to do this. I'm just explaining what many Hungarians are doing at the minute and the reason for it is to save quite significantly on monthly mortgage payments. It is absolutely an additional risk and should be factored into the investment.
 
Re: Prices in Hungary(was part of post on Sunday Indo article)

What effect will the continuing decline in the Hungarian population have on the demand for property in the future?

[broken link removed] Council of Europe report.
 
Re: Prices in Hungary(was part of post on Sunday Indo article)

It's certainly a factor to consider but the fall is less drastic in Budapest than the country as a whole. Interestingly, emigration is not the primary cause of the fall in population though, but rather high mortality rates. Hungary has the highest lung cancer death rate in the world as well as one of the highest cardio-vascular disease and suicide rates. Hopefully this situation will improve in years to come.

In sub-markets in the capital, population decline does not really factor as highly and it seems likely that competition to live in certain locations will continue to be high. Population has been decreasing for decades but at least two major property booms have already taken place since communism ended.
 
Re: Foreign property dreams crash: dismal reading from today's Sunday Indo 21-10-07

Howitzer said:
Do you have a source for this? If it's true Im SOOO in on this deal!
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Hungary is in the continental zone and has a temperate climate. The number of hours of sunshine averages between 1,900 and 2,500 a year.
source:
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Re: Prices in Hungary(was part of post on Sunday Indo article)

Duplex said:
What effect will the continuing decline in the Hungarian population have on the demand for property in the future?

[broken link removed] Council of Europe report.
Click to expand...

Hungary is developing into a central distribution hub for the whole of Europe as I said in my above post ......

7. Removal of borders to EU citizens

This will result in a massive international workforce leading to a dynamic business centre (people go where the jobs are) - already evident in the banking sector but increasingly so in manufacturing and logistics.

As the Motorway projects are completed and the Euro is adopted I think Hungary will BOOM, regardless of population constraints. It will be the international magatism that will save Hungary from following the fate of Italy and other population challenged countries. Afterall ..... all roads lead to Hungary, it makes sense for international business to be based there.

It will be the logistics that will keep Hungary a manufacturing centre - even as wages catch up to the rest of EU in 10 yrs time. Of course tourism will be a very valuable contributor to the economy. It will be interesting to see how well all these new budget Ryan air flights to Budapest from East Midlands / liverpool / Dublin / Munich .... etc fair. They have all started recently - so next summer will be a huge test.

2008 will be surprisingly good for Hungary I think led by tourism boom ....... 2009 will be doubly so ....... 2010 - election year will be interesting. New Government will issue tax cuts to stimulate growth - local pop will pile into property as will the international speculators all be it in a less irresponsible manner - post credit crunch etc.

The one thing that Budapest lacks is a high speed rail link ...... vital for the future - japanese bullet trains would be perfect.

In conclusion - and as answer to the question posed, international workers based in Hungary will keep the property market chugging along nicely. Tourism and wage rises will ensure a bright future as the locals continue to snap up the new developments.
 
Re: Prices in Hungary(was part of post on Sunday Indo article)

Hi Max,
As almost all your posts on askaboutmoney have been about Hungarian property, can I conclude that you have a beneficial interest in trumpeting Hungary?

I am afraid some of your "advantages" rather weakened your argument. The ability to speak Russian hasn't exactly been a boon for Belarus and they're native speakers.

The lack of sunshine hasn't hindered Iceland.

Just because Hungary has had a sophisticated past and some forward thinking economic policies in the last decade doesn't mean buying into property is a sure thing... nor, does it make it comparable with Albania or Romania. It is indeed one of the most progressive countries in Eastern Europe but that doesn't make a property punt alright...

Gearoid.
 
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