A Guide to Buying Property in Hungary

The Purchase Process

Can foreigners buy property in Hungary?

Yes, there are several ways to do it. A good solicitor ( known as Attorney at Law in Hungary) will take you through the whole process for 1% of the sales price.

After you have chosen the property and your solicitor has checked the owner's status at the Land Registry, pay the 10-20% deposit and sign the contract of sale to make sure the owner does not sell it to anyone else. Your solicitor will then file the contract of sale to the Land Registry and your name will appear on the "margin" of the property sheet, as the next owner. This is enough to prevent the previous owner from selling it or putting any mortgage on it. Once the total purchase price is paid you can take full possession. However, you are not yet fully registered. You may only sell the property once your registration on the margin is confirmed. You have a choice of buying as a private person or founding a company.

Buying as a private person

Apply for a permit from the Administrative Office of Budapest. You will get an answer within 60 days. If the answer is positive, you can proceed and receive full registration. From between 6-12 months your name will eventually appear as the fully registered owners on the property sheet. The reason for this delay is merely technical, administrative overload. If the answer is negative, you can choose between setting up a company or filing a suit against the Administrative Office of Budapest, which you have a fairly good chance of winning.

Setting up a company

If you intend to purchase several properties and may be doing other business in the country, founding a limited liability company is recommended. Setting up this company is a relatively easy procedure. It costs around 180,000 HUF to set up a limited liability company (Kft.), including solicitor’s fees. The procedure takes 3-5 days. A sum of 3,000,000 HUF must be deposited in a Hungarian bank for at least 2 days. The monthly costs of accounting is 30,000 HUF even if there is absolutely no activity in the company because quarterly tax sheets and other reports must be regularly filed. Accounting must be done by a certified person. The owner of the company may be one foreigner, two foreigners, or a foreigner and a Hungarian. It is possible to have only one owner, however, in this case an auditor must be paid annually. Corporate tax is 18%. The solicitor will need personal details, a Hungarian address (usually that of the purchased property), a name for the company, and areas of activity specified (real estate sale, management, services). After the Founding Document is signed, the specimens of signature need to be prepared in front of a public notary. Then a bank account needs to be opened for the company and the base capital deposited. With the new bank statement the solicitor can submit the Founding Document to the Court. As soon as the company receives a tax number a registration needs to be handed in to the tax authorities separately, the local municipality, the chamber of commerce (not compulsory), as well as the social security system. All the files must go to an accountant who will take care of everything and warn the owner of legal changes and payment deadlines. A company registered in Hungary can immediately become the owner of property without having to apply for a permit.

The Purchase Costs

Allow around 11 to 12 % on top of the price to purchase a property. This is made up of Stamp Duty from 2-6%, Legal Fees of around 1 to 2% depending on the value of the property. Agents fees of 4% plus Vat of 25%

Expected Rental Returns

The resale apartments in the better districts are the most popular rental property and one can expect to earn around 5% pa. You can rent your apartment as an office in Budapest without any special permits and this gives you extra choice.

Refurbishment of your Property

Most apartments will need some refurbishment and our associates can arrange this for you. If the apartment needs a complete refurbishment including rewiring then allow for this in the budget. Our associates will be able to give you a guide price during your viewing visit.

Letting and Management

It is important to satisfy yourself on the quality of the service in this regard. Our associates can introduce you to a few letting agents and do offer this service themselves to their own clients only. Expect to pay one months rent as commission for renting your property and a management charge of around 10% of the rental income for the ongoing management of the property.

Opening a bank account

You can open a bank account in Hungry and you should do this during your viewing visit to save you having to travel again.

Independent Lawyer

We advise our clients to appoint an independent Lawyer and we will give you the contact details when you are travelling.

The Lawyer will check the legal ownership of the property for you immediately as they have on line links to the registration office. It is important that you phone them when you see a property you like and have this done immediately as this will save you a lot of time and disappointment if you really like the property.

The Lawyer will also advise you on the best ownership structure for your property. You should also discuss with your Lawyer the need for a Power of Attorney to be granted and this should also be arranged during your viewing trip.

Letting Property

Investors normally let their property on a long let basis and sign leases for 1 year. At the start, one months rent is paid as security and one months rent is also paid in advance.

Obtaining Finance

As Interest rates are much higher in Hungry then in the Euro Zone you may be better off to obtain finance in Ireland. This situation will change in due course when they joint the EU and the EMU.

Taxation

Irish residents are liable on their worldwide income in Ireland. This included Income Tax and Capital Gains Tax.

Which Districts are the best to Purchase in?

At the present the best districts to purchase in are 5 and 6 where the Parliament, Opera House and Hero Square are and also districts 7,8,9 and 13. Other areas are also on the move but these will take time and are higher risk now.

The Viewing Process

Aquarius Properties can assist you in advance of you travelling in helping you to get a realistic picture of what you can purchase for your money.

  • We will also assist you in organising your trip and book your accommodation for you. We advise you to travel mid week as all professional offices close on Friday at noon and your time will otherwise be wasted.
  • We can organise for you to be collected at the airport but there is a hotel bus that runs from the airport to the various hotels and it is efficient and saves valuable time.
  • Our associate will have done his homework for you in advance of your trip and should have a portfolio of property to show you. You should call or email the Lawyer in advance so she can also meet you during your viewing trip.
  • Our associated will take you around to see the various properties in your price range and let you have all details relating to them.
  • They can also assist you with all aspects of the purchase including refurbishment of your apartment, fit out and management and rental.
  • Your Lawyer can also assist you with opening a Hungarian Bank Account

What do you need to spend on a property ?

You can expect to pay around €1000 to €1200 per m2 for your apartment in one of the recommended districts and most of the apartments will need refurbishment work of some sort and this cost needs to be factored into your budget. A 2 bed apartment in a block of apartments will usually cost arounnd€100,000 plus the 11%. You will have to add the refurbishment cost to this and the fit out cost as well. It is important not to spend too much on refurbishment if you expect to earn a high yield on your property. Most lettings are to students and offices so you don’t need expensive furniture for this market.