Hungary
has joined the European Union on the 1st of May 2004. The spectacular economic growth and political stability of the country have attracted the attention of the international community. Budapest, a capital city of 2.4 million, has become a bustling financial and corporate center, reminiscent of the bygone splendor of the Austro-Hungarian monarchy.
What type of investment do you recommend?
€ 50,000 - €
80,000 is best invested in a
well-rentable downtown apartment, where a significant capital gain can be expected.
NOTE: Exclusive apartments overlooking the Danube are always good
investments, the market of those is significantly strenghtening.
What's the rental yield?
Net 4-6%.
What
annual capital appreciation can I expect?
10-15%.
Is rental income taxed?
Yes, income tax is 20%, to be paid in Hungary.
Is there demand on the rental market?
Yes, there is an increasing demand for high quality, well-laid-out, western-style apartments.
NOTE: There's
always a need for centrally located studio apartments.
What's the tax on selling property?
The purchase price and corresponding expenses are subtracted from the selling price, if the profit is not reinvested in property, income tax is 20% of the profit. In case of a company
owner, however, only 18% corporate tax is to be paid.
Can foreigners buy property?
Yes, foreign nationals must apply for a permit from the Administrative Office of the Capital City of Budapest in order to buy a specific apartment. It takes about a month to receive this permit. The other alternative is establish a company and buy through this Hungarian legal entity.
Do I have to establish a company in order to buy an apartment?
No, unless a permit for a specific property has been denied.
This option may also saves time and allows more flexibility for tax
planning.
What is the cost of maintaining an average apartment in Budapest?
Property tax is practically nonexistent. Building maintenance fee is €30-40/month, paid by tenant if apartment is rented. Basic utility fees with no consumption: €10/month. Insurance: €100/year. Property management:
8 - 10% of the rental income. When the apartment is rented, the tenant pays everything except insurance.
How much do solicitors charge?
1-2% of the purchase price for preparing the contract of sale and obtaining the title from the Land Registry.
How can I identify and avoid common scams?
Consult with unbiased professionals. Make sure the deal is transparent at all stages. Know the people you are working with. Have a solicitor explain to you the Land Registry Sheet of the apartment.
How long does it take to complete a purchase?
4-6 days. An apartment must be chosen, agreement with the seller, the Land Registry must be consulted, solicitor to draft the contract, 10% down-payment deposited, contract signed. It is common to sign the documents and deposit contract and down-payment with solicitor until certain conditions are fulfilled. A company can be established within a day if necessary.
