Buyers Guide
Hungary has in recent years become one of the Eastern and Central European hotspots for property investments. Investors from all around Europe, but primarily the UK, Ireland, The Netherlands and Germany have made their discovery and conquered the market first in the residential, then in the commercial sector. According to Reuters newswire prices in regional capitals have increased by more than 200% and there is still great potential for further growth fuelled by increasing mortgages. Thus a lot of experience has accumulated with companies providing high-quality service to investors that we will now reveal only to you in this guide. Below, we have summarized for you most important factors you should consider when buying a property in Hungary. 1 PURCHASING PROCESS According to the Act on Acquisition of real Estate by non-residents, non-resident individuals may acquire Hungarian Real Estate provided they obtain a permit granted by the local director of the regional administration office. In case the buyer buys the real estate as a company, there is no need for the above mentioned permit. Once the buyer has made her/his selection, ? she/he signs a proxy based on which an authorized person will be able to sign the contract on behalf of her/him. In case the buyer is in Hungary, the proxy shall be signed in front of a member of our office. In case the proxy will be signed abroad, the buyer will have to go to the Hungarian embassy, or to a notary with apostille right to sign the document. ? she/he transfers the first instalment of the purchase price and the lawyers fee with the costs to my deposit account. I hereby confirm, that every payment can be executed through my deposit account. Please note that any bank charges or transfer fees will have borne by the buyer. Lawyer checks the legal status of the real estate by getting a property sheet from the land office and check the sellers person as well. In case every legal and other circumstances are satisfactory, lawyer will prepare the sale and purchase contract and other necessary documents in order to start the processes in front of the relevant authorities for the permit. The buyer transfers the contractual instalments in accordance with the sale and purchase contract to the deposit account. After the process is closed, lawyer informs the buyer by sending her/him a property sheet proving their registered ownership. Please note that property acquisitions may be paid for in any currency, whether HUF or foreign currency. 2. EXPENSES (a) Lawyers fee: Real estate purchase: 1 % of the gross purchase price + VAT (20%). Setting up a company: HUF 150.000,- (EUR 600,-) + VAT (20%) (b) Costs of the process: In case the buyer buys the real estate as an individual: Costs of the Administrative Office process gross HUF 60.000,- Costs of the Land Office process: HUF 15.000,- In case the buyer buys the real estate as a company: Costs of the Registry Court process: HUF 120.000,- Costs of the Land Office process: HUF 15.000,- (c) Stamp Duty Persons acquiring property are required to pay a property transfer tax of 10% of the purchase price; for residential property the duty is 2% for the first HUF 4 million of commercial value, and 6 % on the excess. This duty is reduced to 2% for enterprises whose main activity is trading in real estate (such property must be sold by the enterprise within 2 years of acquisition) Please note that the above mentioned costs are not included in the lawyers fee. EVALUATING: Potential exists in a lot of markets, but to get the "good ones" out of all the prospective investment properties you should consult a local market expert - that is a real estate agent like in any other country - and you might also want to look into statistical data provided by Hungarian Statistical Office (HSO). Whether or not you find the time for that, a reliable partner should be able to present HSO information, if needed with specifics on each district in the capital. FINANCING: Property prices shall be paid for in local currency, that is Hungarian Forints. Buyers will generally ask for a deposit of 10% upon signing the contract with the remaining amount to be paid within 8-60 days depending on financing and the municipality authorization process. Hungarian banks generally do not directly offer a mortgage to foreign citizens, your agent can be of help in preparing you for arranging a mortgage on your Hungarian home without any problem. Receiving a mortgage shall take 30-60 days approximately. LTVs typically range from 40-70% depending on income coverage and other factors you should consult for.Realtor's will charge around 3% of the purchase value for their services and the fee is usually paid upon paying the 10% deposit. You will be paying stamp duty ranging from 2-6% depending on property value and some additional costs associated with getting the necessary permits from the municipality. Other costs may be justified, depending on what you aim at, but be sure to clarify in advance with your realtor and attorney what they will be. LEGAL: Under Hungarian law, the right of ownership is the most absolute right regarding an asset. In connection with an asset the owner is entitled to:- the rights and protections of possession; the rights of use and usufruct; the right of disposition. The ownership of real property is acquired by a purchase and sale agreement concluded by the parties. The contract for the purchase and sale must be recorded either by an attorney or by a civil law notary. In order to acquire ownership right of real estate by purchase, the acquisition must be registered in the land registry. The purchase agreement will generally be signed in the presence of an attorney. Whether or not advised by your agent, the attorney shall be independent of both the agent and the seller to avoid potential conflict of interest. It is however recommended to go with the attorney recommended to you by a reliable agent - satisfying above mention criteria of course - as these attorneys will already have had experience with foreign investors and will have a contract in your language at your disposal. THINGS TO CONSIDER: 1. Before you buy any property abroad, make clear on what your expectations are. Hungary's capital will provide you with excellent mid and long term returns and an 8-9% rental yield (300-3000 typically) for residential units A rate that is well above the 6% yields of London and Paris. 2. Consider also whether you want a quick and easy solution - like a new flat for, or a recently renovated classical building for example. Should you go the other way - like that of buying a classical property that needs renovation - be prepared from the first minute on to go with a partner that provides you a full range of services from surveying to renovation. 3. Whatever your choice, decide how much you would like to care about your property while capital invested starts making you money. Should you not be willing to devote time to finding tenants, liaising with authorities and the municipality, paying bills, etc. you will need to hire a property manager who in the most obvious case should be the realtor you have been working with through the purchase process. Try to make out in the beginning whether or not your local real estate agent offers such a service or not. 4. Think lifecycle value when you evaluate your investment! Both capital accretion and rental income will give you benefits, however a refurbishment of a classical home in the downtown of Budapest can also give an instant boost of around 15-30% of your property's value. Go back to main information of Property
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Buyers Guide
