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The real estate market in Hungary: 2024 forecast

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As we step into the year 2024, the real estate landscape in Hungary continues to evolve, presenting both challenges and opportunities for investors, homeowners, and industry stakeholders.

In this article, we will give you a clear picture of what's happening in Hungary's real estate scene for the year ahead.

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How's the Hungarian economy doing?

Current state

Hungary's economy and stability have experienced various phases over the years, impacting its real estate market.

Historically, the country underwent significant transformations, especially after the fall of communism, moving towards a market-based economy. This transition brought substantial changes to the real estate sector.

The real estate market in Hungary, particularly in the last couple of decades, has seen growth and development.

Budapest, the capital city, has been at the forefront of this growth, attracting both domestic and international investors. The housing market, a key component of the real estate sector, has also undergone notable changes, with demand for both residential and commercial properties increasing over time.

Government policies have played a significant role in shaping Hungary's housing market.

In the early years of the transition to a market economy, privatization of state-owned properties and liberalization of the market led to a surge in private property ownership. More recently, government initiatives aimed at stimulating the housing market – such as subsidies for homebuyers, particularly families – have had a positive impact.

These policies have helped in increasing the affordability of housing and encouraged new construction.

One notable event in the real estate sector was the 2008 global financial crisis, which impacted Hungary like many other countries. The real estate market saw a downturn during this period, but it has since recovered, showing resilience and steady growth.

Regarding regulatory changes, there have been efforts to streamline property buying and selling processes to make them more efficient and transparent.

These changes are aimed at bolstering investor confidence and making the market more accessible to both domestic and foreign investors.

Hungary has become increasingly attractive for real estate investment, thanks in part to its relatively stable economy and growing real estate market. In terms of investment hotspots, Budapest is the most popular, particularly for commercial and high-end residential properties. Other areas seeing growth include regional cities and tourist areas, like those near Lake Balaton, which attract both domestic and foreign investment.

For foreign investors, specific incentives include the potential for high returns, especially in urban and tourist areas. However, drawbacks can include navigating the legal and regulatory framework, which, while improving, can still present challenges for those unfamiliar with the local market.

When compared to neighboring or similar countries, real estate prices in Hungary are generally competitive.

Prices in Budapest, while higher than in other parts of the country, are often lower than in comparable capital cities in Western Europe. However, prices have been rising steadily, particularly in popular areas and in the luxury housing market.

The legal framework surrounding real estate investment in Hungary is becoming increasingly stable and transparent, reflecting the country's broader economic and political stability.

Efforts to align with European Union standards have contributed to this stability, making the market more attractive to both domestic and international investors.

Outlook and forecast

Hungary's real estate market has several unique factors that set it apart from other countries.

One distinguishing feature is its historical architecture, especially in cities like Budapest, where the real estate market is heavily influenced by the presence of classical and historical buildings. This historical charm, combined with modern development, creates a unique appeal for both residential and commercial properties.

When forecasting Hungary's economy and stability, it's important to consider several factors. Historically, Hungary has shown resilience and adaptability in its economy.

It has been integrating more closely with the European Union, which provides a level of economic stability and growth potential. The forecast, while cautious due to global economic uncertainties, leans towards a positive outlook, assuming continued political stability and adherence to EU economic policies.

In terms of regional growth, Budapest continues to experience the fastest growth due to its status as the capital and economic hub.

Other regions experiencing significant growth include areas around Lake Balaton, popular for tourism, and cities like Debrecen and Szeged, which are seeing development due to their educational and technological sectors.

Comparatively, Hungary's economic forecast appears stable, especially when lined up against regional neighbors in Central and Eastern Europe.

While some neighboring countries may experience faster growth due to specific economic drivers, Hungary’s EU membership provides a level of stability and market confidence that is attractive to investors.

Regarding government policies, while it's challenging to predict specific changes in 2024 without current data, areas to watch include housing subsidies, real estate tax reforms, and zoning law changes. For example, policies that encourage first-time homebuyers or offer tax incentives for real estate development can significantly impact the market.

Some specific facts that suggest improvements in Hungary include ongoing infrastructure development, such as improvements in transportation and technology infrastructure. These developments can increase property values and attractiveness in affected areas.

Additionally, Hungary’s efforts to attract foreign direct investment, particularly in technology and manufacturing sectors, can lead to increased demand for commercial and residential real estate.

However, potential risks for real estate investors include political uncertainties and economic policies that may shift with changes in government.

Additionally, global economic trends, such as fluctuations in the European market or changes in EU policies, can indirectly impact Hungary’s economy and, by extension, its real estate market.

If these risks materialize, the real estate market could face challenges.

For instance, political instability might deter investment, while adverse economic policies could lead to reduced demand and lower property values.

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What about housing prices in Hungary?

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Current state

Over the past few years, the real estate market in Hungary, particularly in urban areas, has generally seen an upward trend in prices.

This increase has been fueled by several factors, including economic growth, increased foreign investment, and a growing demand for both residential and commercial properties.

Historically, real estate prices in Hungary have shown sensitivity to economic cycles.

During economic booms, such as in the early 2000s, there was a notable increase in property prices, driven by higher demand and increased investment. Conversely, during economic downturns, like the global financial crisis in 2008, real estate prices in Hungary experienced a decline, reflecting the broader economic challenges.

Comparing current real estate prices with those from a decade ago, there has been a significant increase. This is especially evident in Budapest, where the demand for both residential and commercial properties has driven up prices.

Over the past decade, Hungary's economy has generally improved, and along with it, the real estate market has also recovered and grown.

Currently, the trend in real estate prices in Hungary can be described as rising, particularly in urban areas. Budapest, being the capital and economic center, has seen the highest growth in real estate prices.

This growth is attributed to several factors, including increased demand for housing and commercial spaces, investment in infrastructure, and the city's appeal to both domestic and international investors.

The difference in real estate prices between urban and rural areas in Hungary is significant. Urban areas, particularly Budapest, command higher prices due to greater demand and better economic opportunities. Rural areas, while offering more affordable options, generally see less demand and lower property values.

This disparity is driven by factors such as employment opportunities, infrastructure, and lifestyle preferences.

Specific facts causing these trends include Hungary's growing attractiveness as a tourist destination, particularly Budapest, which has boosted demand for short-term rental properties. The country's integration into the European Union and the subsequent influx of EU funds have also positively impacted the economy and, by extension, the real estate market.

Additionally, the Hungarian government's policies, such as incentives for foreign investors and efforts to improve infrastructure, have also contributed to the upward trend in real estate prices.

Outlook and forecast

In Hungary, the real estate market is currently being shaped by a blend of economic and demographic factors.

Key among these are the country’s economic growth and stability, urbanization trends, foreign investment influx, and demographic changes. The overall health of the economy, marked by GDP growth and consumer spending, directly impacts real estate prices. As the economy grows, there's typically an increase in demand for housing, pushing up prices.

Urbanization also plays a crucial role; as more people migrate to urban centers like Budapest for better job opportunities and amenities, the demand for housing in these areas increases, leading to higher property values.

On the demographic front, changes in population size and structure, such as an increase in young professionals or smaller average family sizes, can influence the types of housing in demand.

For instance, there might be a growing preference for smaller apartments or homes in city centers. Foreign investment, especially in major cities and tourist areas, also significantly impacts property values.

As foreign investors pump money into the real estate market, this often leads to an increase in property prices, particularly in sought-after locations.

Looking at potential factors that could lead to an increase in housing prices in Hungary, several specific trends and events are notable.

Firstly, continued urbanization and economic growth, particularly in major cities and regions with robust job markets, are likely to keep demand for housing high, thereby increasing prices.

Secondly, areas undergoing significant infrastructure improvements, such as new transportation links or technology hubs, could see an uptick in property values.

Thirdly, regions experiencing a boost in tourism could witness increased demand for properties, pushing up prices, especially in places like Lake Balaton, known for its appeal to tourists.

Conversely, several factors could lead to a decrease in housing prices in Hungary. An economic downturn or recession could lead to reduced demand and lower housing prices. Political instability or changes in government policies that negatively impact investor confidence could also result in a decrease in real estate prices.

Additionally, global economic trends that affect foreign investment or the broader European market could indirectly influence Hungary’s real estate market.

It’s important to note that these factors will not impact all regions in Hungary uniformly. Urban areas, particularly Budapest, are more likely to experience significant price fluctuations, both upwards and downwards, compared to rural areas, which might see more modest changes.

The real estate market in tourist-heavy regions might also experience different dynamics, influenced by factors specific to the tourism industry.

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How's the demand for the real estate market in Hungary?

Current state

The current demand for residential real estate in Hungary reflects a dynamic and evolving market.

In recent years, there has been a strong demand for residential properties, particularly in urban areas like Budapest. This demand is characterized by a mix of both local buyers and foreign investors, with a noticeable interest in certain types of properties.

Regarding the balance between buyers and sellers, it largely depends on the region and the type of property.

In major urban centers, there tends to be a strong demand with more buyers than sellers, particularly for well-located and modern properties. This high demand in cities has led to a situation where the supply of new housing is often struggling to keep up, resulting in increased prices.

Buyers in Hungary are looking for a variety of properties, but there's a notable trend towards modern, energy-efficient apartments in urban areas, especially among younger buyers and professionals.

In suburban areas, there's a demand for larger family homes with gardens, reflecting the desire for more space and a better living environment. Additionally, properties in tourist areas, such as around Lake Balaton, are sought after for both personal use and investment purposes.

Current mortgage interest rates in Hungary have a significant impact on the buying power and demand of consumers.

Lower interest rates make mortgages more affordable, increasing the buying power of homebuyers and stimulating demand in the real estate market. Conversely, higher interest rates can constrain buying power and dampen demand.

Recent changes in government policies and regulations have also impacted the real estate market. For instance, there have been initiatives to provide subsidies for homebuyers, particularly aimed at encouraging young families to purchase their own homes. Such subsidies can significantly boost demand in the real estate market.

Additionally, any changes in tax laws, whether reductions or increases, can affect the overall cost of buying and maintaining properties, influencing buyer decisions.

Zoning laws, which dictate where and what type of properties can be built, also play a crucial role in shaping the real estate landscape, affecting both supply and demand.

Outlook and forecast

In Hungary, demographic shifts such as aging populations and urbanization are significantly influencing the real estate market.

Urbanization, in particular, has led to increased demand for housing in urban areas, especially in and around Budapest. This shift is driven by younger individuals and families moving to cities in search of better employment opportunities and amenities.

As a result, there's a growing demand for apartments and smaller residential units that are well-located, close to work, education, and leisure facilities.

Current trends in household formation also play a crucial role. There's a noticeable trend towards smaller family sizes and an increasing number of single-person households. This change influences the demand for smaller, more affordable housing units, such as one or two-bedroom apartments, particularly in urban areas.

Additionally, there’s a growing preference for modern, energy-efficient homes among the environmentally conscious demographic.

Regarding real estate as an investment, there's a noticeable interest in buying properties in areas that promise high rental yields and capital appreciation. For instance, properties in Budapest, especially those in central districts and near tourist attractions, are highly sought after for their rental income potential and resale value.

Similarly, properties in tourist regions like Lake Balaton are popular among investors for short-term vacation rentals.

Cultural trends are also shaping the housing market. For example, there's an increasing awareness and preference for sustainable living, which is driving the demand for eco-friendly homes. These properties often feature energy-efficient designs, use sustainable materials, and include green spaces.

The trend of buying properties primarily for investment purposes is becoming more prominent. Many buyers, both domestic and foreign, are purchasing properties not just as a primary residence but as a means to generate rental income or for capital appreciation.

Foreign investment plays a significant role in this aspect, particularly in Budapest and tourist areas, where foreign buyers often seek high-end apartments and holiday homes.

Foreign investment is encouraged in Hungary, with relatively few restrictions compared to some other countries. This openness has boosted the demand for certain types of properties, particularly in the luxury and tourism-related segments.

However, it's important to note that foreign investors must navigate specific legal and administrative procedures, which can be a deterrent for some.

In terms of niche markets, Hungary is seeing unique trends in areas like luxury properties and eco-friendly homes. The luxury real estate market is particularly robust in Budapest, where there's a demand for high-end apartments and penthouses with luxury amenities.

The eco-friendly housing market is also growing, with increased interest in properties that offer sustainable features, contributing to a greener lifestyle.

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How's the rental market in Hungary?

Current state

The rental market in Hungary presents a diverse landscape, influenced by regional characteristics, tenant demographics, and economic factors.

In Hungary's urban areas, especially in cities like Budapest, there's a high demand for apartments, particularly in the city center and other well-connected districts.

This demand is driven by young professionals, students, and expatriates who value proximity to work, educational institutions, and urban amenities. Features such as modern furnishings, internet connectivity, and proximity to public transport are highly sought after in these rentals. Additionally, apartments that are close to cultural hotspots, restaurants, and entertainment venues tend to be more popular.

In suburban areas, the rental demand shifts towards single-family homes and larger apartments.

These areas attract families and middle-aged tenants looking for more living space, a quieter environment, and often a connection to nature. For these tenants, properties with additional bedrooms, gardens, and a sense of community are desirable.

Being near good schools and having convenient access to the city center can also be important factors for tenants in suburban locations.

Rural areas in Hungary have a different dynamic.

The demand here might lean towards traditional houses, often catering to local families or individuals working in the agricultural sector. In these regions, tenants typically prioritize affordability and practical features over luxury amenities. Proximity to local workplaces and community facilities can be important in rural rentals.

The demographic characteristics of tenants vary across Hungary.

In cities like Budapest, there's a younger demographic, including a significant number of students, due to the presence of universities, and young professionals working in the city. Suburban areas are more likely to be home to families, often with children, and middle-aged tenants.

In contrast, rural areas might have a more varied tenant base, ranging from young families to older individuals.

Income levels and economic conditions significantly influence the rental market. In affluent areas or districts, tenants can afford higher rents and often seek properties with additional amenities and space.

In less affluent areas, or regions facing economic challenges, affordability is a primary concern, and tenants may seek rentals that offer essential amenities at a lower cost.

Specific regions in Hungary have concentrations of certain tenant groups. For example, areas around universities in Budapest or other cities have a high concentration of students, leading to a demand for affordable, smaller living spaces, often shared accommodations.

On the other hand, regions known for their natural beauty or tranquility, like those near Lake Balaton, might attract retirees or holidaymakers, who often look for well-furnished, comfortable properties.

Outlook and forecast

In Hungary, several factors are significantly influencing the rental market.

One of the most impactful is the evolving lifestyles and work patterns, especially the rise of remote work. This trend is leading to a shift in rental preferences, as people are no longer bound to live close to their workplaces. Consequently, there's an increasing demand for rental properties that offer dedicated spaces for home offices and high-speed internet connectivity.

It's also encouraging people to consider living in suburban or even rural areas, where they can get more space for their money, potentially reshaping the rental market dynamics in these regions.

Cities like Budapest continue to dominate the rental market due to their economic opportunities and amenities.

However, there are emerging urban areas that are becoming new hotspots for rental properties. Cities like Szeged and Debrecen, known for their universities and growing job markets, are attracting students and young professionals, leading to a higher demand for rentals.

These cities are also experiencing demographic changes with an influx of younger residents, which is reflected in their rental markets that cater to this demographic's needs - like affordable, smaller living spaces and proximity to educational institutions and entertainment options.

Technological advancements and innovations are also impacting the rental market in Hungary.

The adoption of digital platforms for property listings, virtual tours, and online rental agreements is streamlining the rental process, making it more efficient and accessible. This tech-forward approach is particularly appealing to the younger demographic and expatriates who are comfortable with digital transactions.

Sustainability and green living are increasingly influencing the rental market.

There's a growing awareness and demand for eco-friendly properties that are energy efficient, have green spaces, or use sustainable materials. This trend is more pronounced in urban areas where environmental concerns are more prominent. As a result, properties that offer features like solar panels, energy-efficient appliances, and green building certifications are becoming more attractive to tenants.

The rental market forecast varies across different regions in Hungary. In major cities like Budapest, the demand for rentals is expected to remain strong, driven by economic opportunities and a vibrant cultural scene.

In contrast, smaller cities and rural areas may experience a more varied demand, influenced by factors like local employment opportunities, amenities, and the popularity of remote work.

The long-term outlook for the rental market in Hungary is one of gradual evolution, shaped by these diverse factors. Urban areas are likely to continue seeing strong demand, but there may be a shift in the types of properties that are in demand, with a greater emphasis on space and technology.

Suburban and rural areas could see increased interest due to the flexibility offered by remote work.

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This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.