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Everything you need to know is included in our Hungary Property Pack
Hungary, with its breathtaking scenery, vibrant cultural history, and welcoming people, draws in many foreign investors looking for property investment opportunities.
Nevertheless, understanding the complexities of buying property in a foreign land can be difficult, especially when it comes to the legal framework and regulations involved.
That's why this guide is here to help! We'll explain how the property market works in Hungary in a straightforward and understandable manner, covering all the information you need to know.
Also, for a more in-depth analysis, you can check our property pack for Hungary.Can you purchase and own a property in Hungary as a foreigner?
If you are American, we have a dedicated blog post regarding the property buying and owning process in Hungary for US citizens.
Buying real estate in Hungary as a foreigner involves a set of regulations that differ somewhat from those for local citizens.
Generally, foreigners can purchase property in Hungary, including apartments and houses. However, when it comes to owning land, especially agricultural land, there are more stringent restrictions.
Foreigners usually need to obtain permission to purchase agricultural land, and in many cases, it might be quite challenging or even impossible.
The main difference between foreign and local buyers is the requirement of obtaining a permit for the acquisition of property.
This process can take several weeks to months and involves scrutiny by local and sometimes regional authorities. For locals, such a process is typically not required.
The rules can vary depending on your country of origin. For instance, citizens of European Union (EU) countries often have an easier time purchasing property in Hungary compared to non-EU citizens, as they are subject to fewer restrictions under EU agreements.
Owning property in Hungary does not automatically require you to reside in the country.
However, if you're planning to move to Hungary, owning property can be advantageous for obtaining a residency permit.
Buying property does not necessitate a specific visa or permit. However, if you're looking to reside in Hungary, you would need to follow the standard immigration processes. Owning property can be a beneficial factor in your application for residency.
As a foreign buyer, you must obtain authorization from the relevant local administrative office. This involves submitting an application that includes details of the property and your personal information.
There's no general minimum investment requirement for foreign buyers in Hungary. The focus is more on the approval process rather than the value of the property.
Can you become a resident in Hungary by buying and owning a property?
Hungary does not offer a direct real estate investment program for residency or citizenship, unlike some other countries.
This means you cannot automatically become a resident simply by purchasing property in Hungary. However, owning property can be a part of your overall application for residency, as it demonstrates ties to the country.
To become a resident in Hungary, you typically need to go through standard immigration processes. These might include applying for a residency permit based on employment, family reunification, study, or other reasons.
Owning property in Hungary can strengthen your case, showing that you have a vested interest in the country, but it is not a standalone basis for obtaining residency.
There is no specific minimal investment amount in real estate that would guarantee residency since the real estate investment route does not directly lead to residency.
The requirements for residency depend on the type of permit you are applying for. Common requirements include proving financial stability, having health insurance, and not posing a threat to public security or health.
The length of residency permits varies depending on the type. It can range from temporary (usually one year, renewable) to long-term or permanent residency.
Permanent residency is typically granted after a continuous legal stay of a certain number of years and meeting specific criteria.
As for citizenship, residency in Hungary can potentially lead to citizenship, but it requires a continuous legal residency of several years, proficiency in the Hungarian language, and an understanding of Hungarian culture and history, among other requirements.
The process of acquiring citizenship is separate from the residency process and has its own set of criteria.
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Market data
You can find fresh and updated data in our pack of documents related to the real estate market in Hungary.
If we check the the GDP per capita indicator, it seems that Hungarian people have become 13.3% richer throughout the past 5 years.
When people have more money, they tend to buy more real estate, and that can make prices increase in the future.
Looking at the data reported by Numbeo, we can see that rental properties in Hungary offer gross rental yields between 1.7% and 4.4%.
These moderate rental yields indicate a balanced return on investment for property owners or investors
To know more, you can also read our dedicated article: is it a good time to buy a property in Hungary?
Daily life of an expat
Life as an expat in Hungary can be quite enjoyable.
The country offers a variety of cultural and natural attractions, as well as a vibrant nightlife. The people are friendly and welcoming, and the cost of living is relatively low compared to other European countries. The public transportation system is efficient and reliable, making it easy to get around.
The country also offers a variety of cultural and educational opportunities, as well as a wide range of job opportunities.
If you're looking for an exciting and interesting place to live, Hungary is definitely worth considering.
However, there are some drawbacks to living in Hungary as an expat. The language barrier can be a challenge, as Hungarian is the official language. Additionally, the bureaucracy can be a bit confusing and frustrating for those who are not used to it. Additionally, the country does not have a well-developed health care system, so expats should be prepared to pay for medical expenses out of pocket. Finally, the weather can be quite unpredictable, with cold winters and hot summers.
What are the best places to purchase a property in Hungary?
This table summarizes some of the best places to buy a property in Hungary.
| City / Region | Population | Average Price per sqm (HUF) | Strengths |
|---|---|---|---|
| Budapest | ≈ 1.7 million | 500,000 - 1,000,000 | Capital city, cultural hub, historic architecture, vibrant nightlife |
| Debrecen | ≈ 200,000 | 400,000 - 700,000 | Second-largest city, educational center, festivals, green spaces |
| Szeged | ≈ 160,000 | 400,000 - 700,000 | University town, cultural events, riverfront location |
| Pécs | ≈ 150,000 | 350,000 - 600,000 | Historical city, vibrant art scene, rich cultural heritage |
| Győr | ≈ 130,000 | 350,000 - 600,000 | Industrial and commercial hub, Baroque architecture |
| Sopron | ≈ 60,000 | 400,000 - 700,000 | Medieval town, wine region, proximity to Austria |
| Eger | ≈ 54,000 | 350,000 - 600,000 | Historical town, thermal baths, wine production |
Want to explore this further?
Do you need a lawyer to buy a property in Hungary?
When purchasing a property in Hungary, engaging a local lawyer can provide valuable assistance in navigating the legal aspects and ensuring a successful transaction.
One crucial document they can help you with is the Purchase Agreement (Adásvételi Szerződés), a legally binding contract between the buyer and seller that outlines the terms and conditions of the sale.
The Hungarian lawyer can also assist with conducting a Land Registry Search (Ingatlan-nyilvántartási Kivonat) to verify the property's ownership status and identify any potential legal issues or encumbrances.
Additionally, they can guide you through the process of obtaining necessary permits and approvals, such as approval from the local Land Registry Office or relevant authorities.
They will ensure that all applicable taxes and fees, such as the Property Transfer Tax and Notary Fees, are paid correctly and in compliance with Hungarian laws and regulations.
What are the risks when buying real estate in Hungary?
We've got an article dedicated to the risks associated with purchasing property in Hungary.
1. Hungarian Land Law and Dual Ownership:
Hungarian land law has a unique dual ownership system, which distinguishes between ownership of buildings and ownership of the underlying land. Buyers should carefully review and understand the legal implications of dual ownership, as well as any potential limitations or restrictions that may arise from this system.
2. Preemptive Rights and Local Communities:
In certain areas of Hungary, local communities have preemptive rights to purchase properties within their jurisdiction. This means that if a property owner decides to sell, they must offer the property first to the local community or municipality. Buyers should be aware of these preemptive rights and understand the potential impact on property transactions.
3. Communist-Era Property Restitution Claims:
Following the end of communism, there have been property restitution claims in Hungary, particularly related to properties that were nationalized or confiscated during the communist era. Buyers should be aware of potential restitution claims and seek legal advice to ensure that the property they intend to purchase is free from such claims.
4. Historical Heritage Protection:
Hungary is known for its rich historical heritage, and certain properties may fall under heritage protection regulations. Buyers should be aware of the restrictions and obligations associated with owning and renovating heritage properties, as these may require special permits and compliance with preservation guidelines.
5. Leasehold Condominiums:
In Hungary, there is a unique type of property ownership known as "leasehold condominiums." These properties have a leasehold structure with a limited duration. Buyers should carefully review the terms of the lease and understand the implications on property value, lease renewal options, and potential restrictions on alterations or subletting.
6. Geothermal Activity and Geological Risks:
Hungary is known for its geothermal activity, which can lead to geological risks such as sinkholes or ground instability in certain regions. Buyers should assess the geological conditions of the property and consider obtaining geological surveys or expert assessments to identify any potential risks associated with geothermal activity.
7. Gated Communities and Maintenance Fees:
Gated communities are common in Hungary, especially in urban areas. Buyers should be aware of the maintenance fees associated with living in gated communities, as these fees can vary significantly and may impact the overall cost of owning a property in such communities. It is important to understand the services and facilities covered by the maintenance fees and evaluate their value for the investment.
Everything you need to know is included in our Hungary Property Pack
What are the documents needed for a real estate transaction in Hungary?
When buying a property in Hungary, the documents required are as follows:
1. A valid passport or other official identification document.
2. Proof of address in Hungary.
3. The deed of sale, signed by both the seller and the buyer.
4. Evidence of payment of the purchase price.
5. A Hungarian tax number.
6. An official appraisal of the property, issued within the last three months.
7. A certificate of registration of the property with the local tax authority.
We review each of these documents and tell you how to use them in our property pack for Hungary.
What are the tips for negotiating with Hungarian people effectively?
By considering these tips that align with Hungarian culture, you can navigate the negotiation process more effectively when dealing with property in Hungary.
Building a relationship with the seller is crucial in Hungarian culture. Take time to engage in friendly conversations and show interest in their lives and experiences. Establishing a personal connection will help create trust and goodwill, which can positively influence the negotiation process.
Politeness and respect are highly valued in Hungarian culture. Maintain a courteous and professional demeanor throughout the negotiation process. Avoid aggressive or confrontational behavior, as it may be perceived negatively.
Before entering into negotiations, it is essential to conduct thorough research on the property, its market value, and the local real estate market. Having well-informed knowledge will give you an advantage during the negotiation process.
Hungarians appreciate logical and factual arguments. When presenting your offer, emphasize concrete details such as property features, location advantages, and recent comparable sales. Use data and figures to support your negotiation points.
Negotiations in Hungary may involve extended discussions and deliberations. Be patient and prepared to engage in multiple rounds of negotiations. Allow time for the seller to consider your offer and respond.
Hungarians often seek a compromise or middle ground during negotiations. Be open to finding mutually beneficial solutions that address the concerns and interests of both parties. This cooperative approach can help foster a positive atmosphere and increase the chances of reaching an agreement.
If you are not fluent in Hungarian, consider hiring a professional interpreter to ensure effective communication. This will help prevent misunderstandings and facilitate smoother negotiations.
Real estate transactions in Hungary can be complex, involving legal paperwork and regulations. It is advisable to consult with a qualified local lawyer who specializes in property transactions. They can ensure compliance with all legal requirements and protect your interests throughout the negotiation and transaction process.
Can foreigners obtain a bank loan in Hungary?
Yes, foreigners can obtain property loans in Hungary. The Hungarian banking system allows non-residents to apply for property loans, subject to certain conditions and requirements.
Getting a property loan in Hungary as a foreigner may require a valid residence permit and meeting specific criteria set by the lending institutions in the country.
Some banks in Hungary that can grant mortgages to foreigners include OTP Bank, K&H Bank, and Raiffeisen Bank Hungary.
However, mortgage rates in Hungary for a 20-year term range from 6% to 10%. Although they are a bit high, they are still relatively competitive. Consider exploring other countries for potentially better financing options.
What are the taxes related to a property transaction in Hungary?
Here is a breakdown of taxes related to a property transaction in Hungary.
| Tax | Description | Calculation | Who pays |
|---|---|---|---|
| Value Added Tax (VAT) | Tax on the sale of new residential properties | 27% VAT for new properties, exemption for existing properties | Buyer |
| Property Tax | Annual tax on the property's value | 3.6 euros per square meter or 3.6% of the property market value | Owner |
| Capital Gains Tax | Tax on the profit from the sale of the property | 15% on the net capital gain (the difference between sale price and acquisition cost) | Seller |
| Rental Income Tax | Tax on rental income generated from the property | 15% tax on the rental income | Owner |
| Transfer Tax | Tax levied on the transfer of real estate | Between 2% and 4% of the market value of the property | Buyer |
| Legal Fee | Fees for legal services provided by an attorney or law firm involved in the property transfer process | Between 1% and 3% of the property value, depending on the complexity of the transaction and lawyer fees | Buyer |
What fees are involved in a property transaction in Hungary?
Below is a simple breakdown of fees for a property transaction in Hungary.
| Fee | Description | Calculation | Who pays |
|---|---|---|---|
| Registration Fee | Fee for registering the property in the Land Register | Varies from 0.01% to 0.05% of the property value | Buyer |
| Notary Fee | Fee for notarial services related to the transfer | Fixed amount or percentage of the property value | Buyer |
| Real Estate Agent Fee | Fee for real estate agent services | Between 3% and 5% of the property sale price | Seller |
Buying real estate in Hungary can be risky
An increasing number of foreign investors are showing interest in Hungary. However, 90% of them will make mistakes. Avoid the pitfalls with our comprehensive guide.