Selling Budapest Apartment

Budapest,

Band vs. Free floating Debate is not a new story. To be honest, it has started since second part of 90s when Hungarian economy was on the right way.

Fluctuation in exchange rate is affected by actual political and economical climate but it would be silly thing to say that current exchange rate is due the debate. I mean change for free floating would not be taken place immediately.

As an economist, comprehensive explanation with accurate information is far from what you say about prompt market. Similar to all markets, prices are based on long term expectations. It is true that Share prices and Currency rates are fluctuated day to day but trends are based on long term expectations(free floating, introduce Euro) and performance (macoreconomic indicatiors, fiscal and monetary policies).
 


Hungary will not join the Euro zone sooner than 2013-2015. It is better to know because this issue might have the same impact on property market that the fact of EU accession. It seems Hungary will be the last country where you can pay in Euro among 10s. I mean the longer waiting time for Euro the higher chance for unfavourable property market in Budapest.

I would be very happy if you were right. But it has a low chance to reach Euro zone in the next five years. We have got enough thing to do with our economy before Euro zone, unfortunately.
 
The general feeling though, Hungary, from local experienced economists I've spoken to, is that the forint is currently neutral/slightly strong and definitely not weak. This is their opinion, not mine. They also indicated that the recent strengthening past 250HUF-1Euro was due to the speculation over getting rid of the trading band.
 
the FT has an article about the Hungarian 'carry trade' today. Basically it highlights the large amount of Swiss franc debt that a lot of individuals in Hungary have taken on in the past few years. Locals are borrowing for their mortgages in Swiss francs because of the interest rate differential. This much we know already. The article suggests that many of the people who borrow in this way are unaware of the risks involved. If global capital markets encounter further turbulance and this in turn leads to an sudden unwinding of carry trades everywhere, Hungarian borrowers could find themselves in difficulty.
 
Budapest,

It looks you do not have any competences in this issue. Telling other's opinion without explanations and supports is not professional. You are talking about experienced economists when Hungarian florint is totally convertible from 2001. Hungary is "a new European country with new currency and new monetary and political system".

However, there are pros and cons in this issue. But it is better if we clarify that Euro is too strong against US dollar (and itself). Actually, I am not the only one who thinks Euro is overvalued and it has serious consequences to the European competitiveness. Euro/US dollar should be around 1 (now over 1.33) because there is no any rational and economic reason why Euro is stronger than US dollar.

This is not the place where we have a chance to discuss about currencies.

Finally, you like a journalist who wants to give answers to all questions such as Why....? Sometimes it is impossible - and of course unnecessary and useless- to tell the answer because "invisible hand" is responsible for all happenings in accordance with complicated world.

I suggest you focus on trends instead of spot rates. This is the same when you have shares...The question is: Are you a daytrader/speculator or an investor? If you are an investor in Budapest you should forget spot rate of HUF/Euro...
 
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I've stated before that of course I'm not an economist. I do however have personal contacts who are and I value their opinions. Those I've spoken to work for an international economics firm, a local monitoring body and as a university lecturer in BME.

I'm going to watch out for that invisible hand!
 
budapest said:
I'm going to watch out for that invisible hand!
Click to expand...

The invisible hand reminds me of a financial competition between 3 professional traders, a 4 year old girl, a medium and a monkey
(organised by a British financial magazine).

They had to make a selection of stocks and currencies.
The 4 year old girl won the competition, before the monkey.
The financial experts had apparently too much information and ended the competition with a very moderate score.
The medium obviously wasn't very "clairvoyant" because she ended last.

Ok, this is just a anecdote, but I think it tells something about the often unpredictable character of the financial world.

To return to the topic: I don't believe it's a good time to sell in Budapest.
Hungary has a few more difficult years in front, but once the Euro integration is finished the local real estate market will boom for sure.
Hungary has everything to become a main player in Europe. A tradition of hard working and the country is very well situated in united Europe.
You could say that the invisible hand has some good cards to play
 
Hi Pinchy,
I am just wondering if you have made any progress in selling your apt?I would be interested to know how long it takes to sell the apt. If we are to believe some the media articles it seems it is impossible to sell an apt. in budapest at the moment. I wonder is that really true? Keep us informed about how you get on.
 
pbrosnan, the reality is that well-located, high-quality apartments in renovated buildings at realistic prices sell easily in Budapest at the minute. Apartments like your's where the building is in really bad shape are much more difficult to sell. The market is very segmented and currently, investors prefer properties in good buildings.
 
I guess i was pretty foolish to buy an apt. in a poor building. In spoke to my agent and she said that there are no plans currently to renovate the building, which means that i am basically stuck with a nice apt. in a building that could easly be renovated but nobody apart from me seems to want to do it. Hopfully Pinchy has not made the same mistake as me.
 
pbrosnan, I have just put my apartment up for sale on Hajos, in a partially renovated building. I will post when it sold. My tenant wants to stay until June so I have given here one months free rent to facilitate all the viewings (if any!). To be honest, I will be happy to get the same price I paid for it, which will leave me with a loss of over 10k, but I have better uses to the put the capital to. The question 'when is the right time to sell' can only be answered if you can define where else you can put your money to gain you a better return. Until now, I didn't have, now I do, hence I sell!
 
Hi amgd 28
I too have found what i believe is a better project to invest the borrowed money that i have tied up in the budapest apt.It is difficult to admit that i have probably made a mistake buying in Budapest and if i am to sell now i will make a loss like you. I now know that property can go down as well as up.Just being able to sell the property and release the equity fairly quickly is very important to me. I must now bit the bullet and sell at a loss, then reinvest in another project or stay for the long haul as some posters have suggested. Many thanks to the posters for their advice.
 
It's a pity that your house manager is not at least trying to sell the attic space. Quite a few buildings on this street have successfully managed to do this over the last few years. Perhaps some of your neighbours are against the idea, due to noise, inconvenience and dust issues.

If you're sure that you've found a better project, then the best of luck with it, but bear in mind that property is almost always a long term investment. You're getting quite a good return and have an apartment with (potentially) favourable long-term prospects. Getting a 65-70% mortgage in Hungary should also be possible, which would free up most of the mortgage from your Irish property.
 
Hi Budapest, Thanks for your advice. I will way up my options.I am not sure however if i want all that hassle with inefficient Hungarian banks. Taking out a loan on the apartment would probably be a beuratic nightmare. Everybody seems to have some problem with property in Budapest at the moment, just look at all the other posts. It is a story of unfinished apts, poor building standards, developers going bust etc. Maybe we are better to get out now before we really loose our shirts.People complain abour Bulgaria but Budapest at the moment seems alot worse.I am trying to be positive but it very hard in the current climate.
 
A lot of people are having problems with apartments in Budapest at the minute, but I think it's much more likely for people to complain on a board like this rather than post positive experiences. In addition, most of these complaints are in relation to either lower-quality classic apartments or snagging/completion date problems with new developments. Another issue is that posters have generally been very honest and upfront about the Bp property market, something which may not be the case with other locations.

Anyone I know who researched the market properly and bought the right property at the right time is doing well. The rash buying of 2001-2004 (approx.) doesn't really happen anymore. I know of one investor making 10% consistently on a classic apartment near the opera house in District VI, which he purchased three years ago. Investors I know who purchased in the last year are making 6-7.5% quite easily on various apartments they bought on quiet streets in Districts V and VI, even at lower/realistic rents. They don't post on boards like this, because everything's going well for them.

There is still strong demand for apartments, which are furnished to an excellent standard in the best parts of the city centre, from a large group of international students and younger professionals. For this group of tenants, location is paramount and they won't be able to afford Gozsdu Udvar/Avenue Gardens, but where possible, would prefer to rent a real Budapest apartment. There is also strong tenant demand for specific newer developments in secondary locations.
 


I believe that the Hungarian population is falling will this have an effect on demand for property in the longer term?
 
If only it were that simple! A huge socio-economic shift is taking place over here. Over the last few years, there has been a change in the way people live and where they live in Budapest. Many older people are leaving desirable parts of the city centre and moving to detached houses in the outer suburbs. Younger wealthier individuals are taking their place. Some of the most expensive property in the city is located in previously undesirable neighbourhoods, while some of the traditionally prestigious neighbourhoods are becoming more run-down and less popular. It's all a bit of a minefield.

It's not a mature market and therefore contains much more risk (and potential opportunity) than more established markets. In the earlier years of this decade, many smaller scale investors made the mistake of thinking that Budapest would follow the more predictable economic pattern of a mature market.
 
Me, I am not satisfied with this discussion. On one side, Budapest talks about what you should do if you want to invest as a professional and clarify that a significant part of first time buyers here in budapest 2000-2004 made general mistakes. On the other side, investors, who made mistake such as purchasing an apartment in a poor building, for instance, talk about their loss.

Who wants to talk about solutions for the current unfavourable situation in Budapest? Who wants to talk about how to run out of Budapest as a professional and not as a crazyman if you want? Who wants to talk about how to manage your financial loss if you have?

Talking about what happend and what should have done if you had did it again...lead to nowhere if money is invested!

Are you a business man/woman or just a crying/dreamer child!

This is the real world please...

I would be happy to discuss about solutions with you instead...
 
Well Hungary i do agree with you that there is no point in crying over spelt milk, what is done is done and i cannot go back now.What i am trying to tease out is what is the best option to take now. As you can see different posters have completely different views on the Budapest market and which way to go from here.I never claim to be an expert on Budapest property so i am really looking for advice from people on the ground. Nobody wants to loose money but of course but nobody wants to flog a dead horse either.I am grateful for the advice and i hope the advice given will help other investors in the same position as me which i am sure there are many.
 
pbrosnan,

Let us make a short summary of what we know about your investment:

- location: district 6 , Sziv St. (poor building)
- size: 80 sqm
- purchasing price: 76000euro
- rented for 400 euro a month

At the first sight it does not look bad. However, we know that you do not feel yourself in safe because:

- re-selling price would not be significantly higher that your purchasing price was
- poor condition of the building has serious impact on financial benefits
- both renting and selling potentials might be determined unless building is renovated

Thanks to tenancy you have positive cashflow from your investment even if capital appreciation is close to 0% according to current market environment. But your feelings and pessimistic future permformance (difficulties in finding a new tenant and or selling the apartment) make me worried. I mean your view and market situation together need to be investigated if I want to give you advices on this matter.

The simple question would be selling or keeping? But I do not think simple question would make sense in your case. The business question would be you want to keep it or sell it? Hope you understand the differences between question and question. Your decision is based on approx. 50% emotional and 50% financial reasons if we expect you do not panic. If you do panic emotional reasons are much higher. In this case, I cannot tell you anything by which your mind would be changed. Further, it is better to sell if you are not happy with it. Otherwise your days would become a nightmare and would be thinking of worst scenarios such as long vacancy period and long re-selling process with low price, etc. Therefore my suggestion is:

- relax and discuss it with you: I want it or not
- if you want to keep it becasue you are optimistic in long term, try to invest into another property (not only in Budapest, for instance) in order to make a good decision and manage the financial risk if Budapest property does not provide you a reasonable return
- if you want to sell it because you do not want to take risk with that property, sell it a.s.a.p with tenant (tenancy must have a good impact on re-sell options)

I want to emphasise that re-selling would be a hard job but working on it would make you optimistic because you have decided and do not waist your time for arguments with yourself day to day.

All in all, this is your battle with yourself first. And then we can discuss how to invest into a new property and or how to sell it.

But do not panic please!

Have a beauty sleep
 
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