The Property Market
Reflected in line with this positive economic growth, Hungary has witnessed unprecedented increases in property values over the past few years. Typical levels of appreciation for properties in well-located areas have seen increases of 10-15% per annum, coupled with an average yield of 6-8% for apartments. Some areas in Budapest have seen increases of 50% in the past year and a half.
And prices still have a considerable way to go before they catch up with fellow European countries. The table above maps out the relationship between property prices and income per person in a number of major European cities. Theoretically the richer on average each person is in each city the higher you would expect property prices to be. With Budapest in the bottom left hand corner of the table it shows that both property prices and income per person is set for many years of growth.
Financial Stability
Politically and economically, Hungary is light years away from its former Communist doctrines. It is a stable and transparent system that moves in line with EU policy. The government is committed to a cost efficient smaller state, and for credibility, predictability and transparency, which are all vital signs of stability for investors.
A whole host of Western heavyweight companies have all given Hungary the thumbs up and set up business there, including General Electric, Coca-Cola, Citibank, Ernst and Young, Nokia, Eriksson, and IBM. Many of these companies have been firmly established there since the 1970s.
Budapest has become one of Central Europe’s most popular cities, offering an ideal mix of culture, history and great business opportunities. With its architectural beauty and financial growth, it has become a superb location for investors. On average, the rise in apartment prices over the past year and a half in Budapest has been 19%, according to a study carried out by Ecostat Institute of IT and Economic Analysis.1 And based on the estimated inflation rates for 2005 and the steady growth in property prices over the past few years, local predictions expect the market to rise a further 3% by the end of April this year.
Budapest is still one of the cheapest cities in Europe – according to a study compiled by the Economist Intelligence Unit. It has the lowest cost of living of any major European city. Naturally this is reflected in property prices. Real estate prices in Budapest are currently lower than in comparable European cities like Prague. Looking at the market another way, picture Ireland and in particular Dublin ten years ago – this is what Budapest is widely believed to be at present. On average the price of a property in Dublin today is more than double the Hungarian equivalent.
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