General country information
Hungary, once part of the Austrian Empire and more recently aligned with the Warsaw Pact, is now a full member of the EU.
The country is landlocked and has borders with Slovakia, Ukraine, Romania, Serbia, Croatia, Austria and Slovenia. Almost three quarters of the country is a low plain which is surrounded by the Carpathians, the Alps and the Dinara mountains. It has only one major city, Budapest, which attracts an estimated 60 per cent of all foreign investment.
From 1997 to 2006, Hungary enjoyed robust economic growth of about 4% per year. However, when the global credit crunch broke out, Hungary became particularly vulnerable mainly due to its high level of both private and state borrowing. Economic growth slowed sharply to 0.13% in 2007 and 0.74% in 2008. Then in 2009, real GDP shrank by 6.7%, the worst economic contraction since 1991. In October 2008, the government was forced to ask the International Monetary Fund (IMF) and the European Central Bank (ECB) for a rescue package worth US$25 billion to restore financial stability and prevent the Hungarian economy from collapsing.
The Hungarian economy returned to growth in 2010, with real GDP growth rates of 1.2% in 2010 and 1.7% in 2011. However, the economy contracted again by 1.7% in 2012, amidst high debt, high unemployment and the eurozone debt crisis.
In March 2013 however, the annual inflation rate fell to 2.2%, from 2.8% in the previous month and the lowest level since the country’s transition to a market economy. This sets the ground for more rate cuts to boost the economy.
After 4 years of decline the housing market is showing signs of recovery. The primary housing market showed remarkable improvement, with new dwelling prices rising 7.4% in 2012 (1.9% inflation-adjusted), the first year-on-year increase since Q2 2009. Construction remains weak however mortgage lending is very tight.
Property purchase costs are around 6.455% – 12.305% of the property value. Transfer tax is levied at progressive rates, from 2% to 4%. Real estate agent’s fee is around 3% to 5% plus 27% VAT. First transfer of property is subject to 27% VAT.
Net rental income and capital gains are taxed at a flat rate of 16%, but income-generating expenses are deductible from the gross rent.
Hungary’s rental market is generally pro-landlord. New tenancies in Hungary are generally unregulated, with the exception of state and municipal property.The parties are free to negotiate rents, and to negotiate the method of any increase in rent that they may wish to devise. The deposit, its rate and other conditions can be freely agreed by the contracting parties. The tenancy agreement may be concluded for a definite term, or an indefinite term, or until the occurrence of a certain condition defined in the agreement. The landlord must give a termination notice to the tenant prior to the expiration date of the contract.
Obtaining a clean title to property is one of the acknowledged dangers of buying property in Hungary and at least one law firm advises clients to ‘signing nothing’ until everything has been checked.
In 2013-2014 Hungary may well be worth considering for property purchase, particularly if minimal financing is required.
Area: 93,030 sq km
Population: 10m (July 2004 est.)
Principal cities: Budapest
Median age of population: total: 38.4 years, male: 35.9 years, female: 41.1 years (2004 est.)
Language: Hungarian 98.2%, other 1.8%
Employment rate: 94.1%
Flying time from UK: Budapest – 2.02hrs
Currency: forint (HUF)
Time difference from UK: UTC/GMT +2 hour
Rate of inflation: 6.0% (2013 est.)
International dialling code: +36
GDP per person (US$) $ 14,044
Climate: temperate; cold, cloudy, humid winters; warm summers House price inflation: 5.8%