the state of the hungarian economy and recovery

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seánieboy

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I have been watching television for the past few nights and Budapest has taken centre stage of a massive political row. I know that Hungary is a new democracy and that the people aren’t used to their politicians lying to them morning noon and night but it’s an accepted thing in politics over here anyway. I’ve never met a politician that could answer you straight on to a question before wrangling out of it in some other fashion by probably asking you a different question and throwing you off course. Therefore it doesn’t come as a great surprise to me that they did tell a lot of lies, Maybe the people in Hungary could come over here and give us Irish a few lessons in demonstrating and showing there disapproval with the Government.

But it’s all fine joking about state corruption between ourselves but there is different issues at large. For one thing people like myself Investing in the country of Hungary what is the prognosis for Business in property now in Budapest? Does this throw my investment completely up in the air altogether? Does it mean that the apartment that im after purchasing is going to be terribly undervalued and that it will take years to come out of the economic doldrums?

What is to happen to our investments in Hungary right now do you think there will be much economic confidence left in the country after this and will foreign investment dry up.

I know the forint has been volatile in being devalued against the Euro for most of this year right now as recently it depreciated to a level of 280 to the Euro. But as this chaos has hit the country will it fall again to unprecedented lows or will it bounce back. Right now it suits me personally to have it this low as it will cost me less for the purchase of my apartment in Akacfa Utca 26. Long term though is a different matter as the devaluation of the currency wouldn’t be really good on the country in general.

What is the talk right now about Hungary joining the Euro I believe they were talking initially about 2008, then that changed to 2010 and then changed again to 2013, and finally people have such little confidence of joining the Euro that they have stopped talking about it altogether would there be much truth in all this and if so what would be you’re opinion for the economic recovery and business prospects for myself and every other investor that has taken a chance in this beautiful gem of a city.

I also have been told that the construction has started on Akacfa Utca on the 1st of September which is great news. Has anyone been past that construction site in there travels lately and what does the site resemble right now. I also have been told that the construction of the 46 apartments won’t be ready until the end of March 2008. This really suits me as I will be in a better financial position at that time

I would appreciate all youre opinions thank you
 
I don't think that the current political situation will have any major effect on either the level of foreign investment or the strength of the forint. The fact that Gyurcsany didn't tell the truth about the state of the economy to get re-elected has been confirmed by him several months ago. The only development is that a tape was strategically found just before the local elections, on which he really admitted nothing new, so I'm not sure why it's now worthy of worldwide media attention. When people realised (after the election in the Spring) that the economy was not in such good shape, the currency got weaker and eventually fell to 283HUF=1Euro. Most accounts I've read have suggested that it's likely that the forint will get stronger in coming months, after possibly weakening temporarily over the next couple of weeks. Yesterday it ended trading at 273HUF=1Euro.

The current economic programme is aimed at reducing the budget deficit from 9% of GDP to pave the way for the adoption of the Euro sometime after 2010. Most people think that it will more than likely happen between 2010-2012.

The main risk to the economy, as I see it, is if the harsh (but essential) economic policies that have been put in place in recent months, are relaxed due to political pressure.
 
property investors ought to have a medium-term timeframe at least. in this respect the Hungarian economy is facing a rocky patch but the lure of the euro ought to enforce some economic discipline on local politicans. it is funny that all of these concerns are only being discussed now given that the Hurngarian economy has been under pressure for some time now. do property investors ever really consider the state of the economy in which they are buying in?

i suspect that the price of Hungarian property for Irish investors is determined more by Irish property prices rather than local economic conditions.
 
If you are worried about the state of the Hungarian economy for the next 2-3 years, or worried about ths events of the past few days, then you are wasting your time being an investor in that market!

If you take a 10-year view, then it looks much brighter. the euro should arrive about 2013. The PM's promise of a 2010 date is part of the lies that has him in the current trouble.

Its the same old chestnut, repeated MANY times by a few investors, on AAM, but I'll say it again: Don't listen to the agents. Do the research. The hungarian market is at a MINIMUM a medium-term outlook.

Hungary is emerging (and nothing suggest this will change) as the economic center of eastern europe.

As Budapest said above, the main risk is now if they bow to the public pressure and trim down the tough economic sanctions they had adopted to try slow inflation and speed access to Euroland.
 

I would advise anything thinking of investing in Hungary at the moment to have a read of David McWilliams article in the SBP today, it doesn't make easy reading for those who are in already

[broken link removed]
 
hard one to call. But it certainly shows one thing, that hungary is at least a medium term (c.10 year) investment.
Hungary is still the economic center of Eastern europe, with a great number of high0tech and manufacturing companies moving/moved there.

look at it this way: of all the assession countries, how many hungarian's have you seen in ireland? versus Polish, latvians, romanians, estonians etc etc etc ..... Hungarians are all still there, in hungary, working.

McWilliams is good, no doubt, but don't buy into the 'burning cars' scenario; a lot of that was football holligans latching on to the arguement (remember the Love Ulster march in Dublin anyone? it was beamed around the world. Or Paris? ... )

he's right on one thing, too many irish bought expensive 2 and 3 bed apartments in areas where rents are non-existant or very low. Now they cannot rent the places, and cannot sell them either; but are stuck with the repayments. Sticky situation
 
It's an interesting article and raises some questions, but as is the case with most of the Irish journalistic accounts of the recent political problems over here, it uses generalistions and throws in several inaccurate facts, such as the main interest rate being 12%. It's actually 7.25%. The MTV building was briefly occupied on Monday, not Wednesday night and the relevance of the Euro value of property over here is not mentioned. The HUF price is usually the official one, but in many cases in the downtown area, this can fluctuate depending on the Euro value at any given time. Mortgages are commonly taken out by Hungarians in Swiss franc or Euro at lower rates. I'm not sure what relevance a few burnt out cars in District V has to anything. A very small group of mostly football hooligans did this, which has little to do with anything political or economic. Most Hungarians would be horrified to read many of the largely sensationalistic and inaccurate articles I've read in the foreign press over the last week.

There are obviously huge economic issues to be dealt with but reducing interest rates is not an urgent priority. In my opinion, one of the most important areas is getting everyone to pay tax on the money they earn. As was the case in Ireland in time gone by, the majority of people over here are paid a wage officially and then a lump sum in cash. It's everywhere and difficult to avoid. Many employers even refuse to pay everything over the table. Bogus companies are frequently set up purely as a way of avoiding tax. This whole epidemic is only starting to be solved and will take time as it did in Ireland, but when it happens, it will create a huge income stream for the government.

I've read in other threads about Irish now rushing to sell their apartments over here. Why would they? Hungary was always a 10 year investment and economic problems were going to be part of the course.

I do however agree that some Irish people have invested badly over here, paying too much 2-3 years ago. Some continue to do so and as has been said before, research is the key to making a good investment.

Budapest
 

No offence but I think it's somewhat naive to say that investing in Hungarian property was always going to be a 10 year investment. For a large proportion of Irish people buying in Budapest, and most other "exotic" locations, it has been seen as a get rich quick scheme. The reasons for investing weren't based on years of personal experience and research but more the fact that Joe down the road invested there a couple of years back and sure hasn't he made a killing.

Fair enough it's a long term investment for you and you obviously have a thorough knowledge of the market but properrty prices are set on the margins, and much as those people panicing now may wobble the market fact is that their irrational exhurberance is what brought such fabulous growth in prices in the last 5 years or so.

The reason these people are rushing to sell is exactly the same reason why the rushed to buy in the first place, ignorance and greed.

Property should always be a long term investment due to the high transaction costs but a lot of Irish people, whilst their personal worth has increased astronomically as a result of the rising property market, don't appear to have gained a great deal of financial accumen along the way.
 
Howitzer said:
No offence but I think it's somewhat naive to say that investing in Hungarian property was always going to be a 10 year investment.
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I'm not sure why you think saying Hungarian property was always going to be a 10 year investment is naive?

I've bought property there with a view to selling in 10 to 15 years. I think it's a safer bet than buyiing property in Ireland or the UK at the moment.
 

I'm saying ther opposite, I expanded on the point in the rest of the post. It's naive to think that everyone who bought did so with an eye on it being a 10 year investment, many were in it for the quick buck. And whilst their naievity bolstered the market it may also buckle it.
 
TBH, most entered the market on the advise of their friendly estate agent, with promises of 20-30% growth in a market that couldn't support it, and in fact where it just didn't exist.
The only successful speculator in Budapest was teh irish fella who found another Irish fella to sell his apartment to!
 
I agree with you Howitzer that there are certainly some people who have bought property here hoping for instant appreciation, but most people I've spoken to have a medium term outlook.

I don't think it's naive to say that Hungary was always going to be a 10 year investment. What is naive is the attitude of some Irish speculators, who didn't research the market properly 2-3 years ago.
 

Are you suggesting that property in Hungary will be worth more than it is today in ten years time? What data have you used to make this forecast?
 
Duplex said:
Are you suggesting that property in Hungary will be worth more than it is today in ten years time? What data have you used to make this forecast?
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I think Budapest is making a reasonable assumption, or perhaps an educated guess (he lives in Budapest after all).

its a reasonable assumption to assume that all the assession countries will profit and expand in some way shape or form from joining the EU, and 10 years is a long time; especially if hungary join the euro in 2012-2013.
 
paddyd said:
its a reasonable assumption to assume that all the assession countries will profit and expand in some way shape or form from joining the EU, and 10 years is a long time; especially if hungary join the euro in 2012-2013.
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2014 is now the [broken link removed] "earliest" date.
 
hmmm said:
2014 is now the [broken link removed] "earliest" date.
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yep, totally agree, just wasn't sure if anyone would believe me if I said 2014!
I notice in yesterdays papers that the guys advertising hungarian property still say 2010 to join the euro, and Cap Appreciation rates of 20%.
 
paddyd said:
its a reasonable assumption to assume that all the assession countries will profit and expand in some way shape or form from joining the EU, and 10 years is a long time; especially if hungary join the euro in 2012-2013.
Click to expand...

Ireland was still an economic basket case for the first 10 years of it's time in the EU (73-83). I think it's unrealistic to think that accession to the EU is an automatic guarantee of success.
 
Afuera said:
Ireland was still an economic basket case for the first 10 years of it's time in the EU (73-83). I think it's unrealistic to think that accession to the EU is an automatic guarantee of success.
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but we got it right eventually!
and I'm not sure I'm even talking about 'success'; but more a case of 'better off'.
 
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