Eastern Europe Property

BUDAPEST -(Dow Jones)- Returns on Hungarian real-estate investments are an above-average 7.7% but will drop to 6.7% by 2010, Peter Kocsis, head of HVB Bank Hungary Rt.’s real-estate division, said Wednesday.

The average return in western Europe is 6.0%, Kocsis told reporters.

“The Hungarian market has a 170-basis-points premium compared to western European markets, but this will shrink to about 50 basis points over the next five years,” Kocsis said, citing an HVB study of office, retail, industrial and residential real-estate.

“With returns at 6.7% by 2010, we will see a general rise in real-estate asset values,” Kocsis said.

The amount of available top-quality office space is expected to grow by 30% during the next five years and monthly rent will stagnate at a level of EUR12 to EUR13 a square meter.

In the retail segment, available real-estate assets, or stock, will expand by 40% but the occupancy rate, now 90%, is expected to remain largely unchanged.

Industrial real-estate will register the highest level of stock expansion at 50% and monthly rental fees will be around EUR4 to EUR4.5 a square meter in the next five years.

Budapest’s residential sector will post a slight increase in the number of newly built apartments but price increases are expected to remain below the level of annual inflation.

The Hungarian market carries a number of risk factors, including its relatively small size and young age, as well as uncertain liquidity and short- term planning by a number of market players, the study said. Uncertainty is further boosted by the lack of market standards, excessive public spending and risks pertaining to the Hungarian forint.

Despite existing risks, HVB says the real-estate market will expand rapidly until 2008, when oversupply is expected to flatten the growth curve considerably.

-By Edith Balazs, Dow Jones Newswires; +361-267-0623; edith.balazs@ dowjones.com

The house market in Hungary’scapital is both affordable and set for strong price growth, writes Graham Norwood

The feverish world of property investment an Eastern Europe has perhaps only one significant marketboasting long-term stable price rises and reliable buy-to-let returns – Hungary.

While cheap mass-produced flats in Bulgaria and ever-more exotic places such as Estonia have attracted the headlines and speculators, Hungary’s capital Budapest is attracting more serious investors.

“It’s the most popular East European location for informed British buy-to-let purchasers,” says Liz Symes of Connect IFA, a mortgage broker advising on homes in more than 30 countries.

Property prices rose from a low base in the early 1990s when Hungary held its first post-Communist elections. Even after 10 per cent-plus annual price rises in the past decade, typical Budapest homes remain half the price of comparable examples in London, Paris or Berlin. And, unlike Bulgaria, Hungary’s corporate rental market is very strong.

Its economy liberalised longbefore EU accession in 2004, and the city council boasts that 44 per cent of multinational companies with central European subsidiaries use Budapest as their local base. There is widespread anticipation of big growth in house prices when Hungary adopts the euro in about 2010.

Shlomi Shlomovitz of Casaro Hungary, a Budapest lettings agency, says there has been a rise in student renters this year, as well record numbers of staff being brought in by multinational firms such as IBM, General Electric and Microsoft. “Returns should be between 6 and 15 per cent per year for buy-to-let investors,” he says.

The freelance TV producer Liz Bunton, from Battersea in south London, has bought a flat in a new development in the 14th district, close to Budapest’s financial area. Bunton, who also owns a property in Slovakia, says she chose Budapest for capital growth.

“I’ve invested in fast-moving economies where the GNP is forecast to grow at a strong rate. At about £60,000 per investment, I know I’m getting value for money and expect prices to rise substantially in three or four years,” she says. Many investors take a different route, and buy older homes for conversion. Most Budapest homes were built between the 1880s and the early 20th century, but due to subsidised rents and state ownership until the early 1990s, they have been roughly treated by tenants. There are 800,000 flats in the city, but 25 per cent need renovation, estate agents claim. At best, these apartments are shabby-chic; at worst, just shabby. Typical flats needing work include aone-bedroom flat in the 9th district for just £41,380 (Central Homes, 00 36 1354 1254) and one in the 7th for £63,000 (GDSP, 00 36 1288 0985).

On the edge of Budapest are country houses with large apartments ripe for conversion; one is on sale through Heath Properties in Buckinghamshire for £96,500 (01296 395 800).

One specialist firm in the city, New Budapest Renovation, runs its website in English and has English-speaking site foremen.

For investors wanting work completed before they buy, there is no shortage of new-build and renovation schemes. The largest new-build development is Marina Part in the 13th district, where 4,000 homes will be built near the Danube. The largest regeneration scheme is the Corvin-Szigony project in the 8th district, which will see the conversion of 1,400 period homes and the building of 2,500 new ones. Typical new-build properties beingsold to Britons include City Home, a block of 96 mainly one-bedroom apartments over eight floors, with sauna, pool and 24-hour concierge, in downtown Pest (from £68,200, Savills,020-7877 4700). Also in Pest is Istvan Park; 280 new flats, mostly small, starting at £45,000 (L et-terstone, 020-7348 6065).

What new and older properties have in common is strong potential growth for investors because of Hungary’s booming economy. Pricewaterhouse Coopers says the country should enjoy 4.5 per cent growth in 2005, and again next year, with the general housing market and the buy-to-let sectors both benefiting.

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Where to buy

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Buda, on the west of the Danube, has 500,000 residents and six districts. Pest, to the east, has 1.3 million residents and 13 districts. Foreigners need a permit, solicitor’s letter and search documents before being allowed to buy – a slow process. It’s easier to create a Hungarian registered company (€1,000), allowing you to offset most costs against tax. Lawyers’ fees are 1.5 per cent of the property price; estate agency fees paid by the buyer are 4 per cent; if you resell within two years, you normally pay an extra 2 per cent tax. On new-build, you pay a 20 per cent deposit, 30 per cent when the frame is finished, 30 per cent when the interior’s complete and 20 per cent on handover. Capital gains tax varies, but is reduced if a property has been owned for six years or longer.

The official launch of Phase IV of Marina Part – voted Best Development in Budapest – became a virtual stampede on Saturday 10th September 2005 as existing owners of earlier Autóker Holding projects were given the first opportunity to view the latest and best stage of Budapest’s finest development. River-view apartments and those overlooking the marina itself were in especially high demand. It was estimated by the end of the day that around 50% of the apartments with Danube-facing views had already been reserved. “The interest has been beyond our expectations,”said an exhausted Eszter Vadas, Assistant Sales Manager of Autóker Holding Plc, Hungary’s most respected developer.

It was announced during the launch that against fierce competition, Hungary Property Ltd, based in Crawley, West Sussex, has been awarded the exclusive rights to market and sell Marina Part apartments in the UK. “It is a privilege to continue to be part of this unique project”, announced Martin Padfield, Managing Director.

“With 70% mortgages now widely available, no agency or finder’s fees and a streamlined buying process, there has never been a better time to invest in Marina Part,” continued Padfield.

“Autóker feels that Hungary Property is the best company to forward the investment opportunity that Marina Part offers to the UK public and we promise to honour their decision by continuing to provide UK investors the best service possible.”

Reservations are now being taken. Some Danube-facing apartments are still available but are going fast.

Marina Part ( www.marinapart.co.uk ), comprising up to 3,000 residential units within a 300,000m2 area on the banks of the River Danube, promises to be one of the best and most beautiful 21st century self-contained neighbourhoods in Europe, comparable to Canary Wharf or Brighton Marina.

In 2004, it was crowned ‘Best Residental Project in Hungary’ for that year by the readers of Resource Magazine and in the spring of 2006, it will be featured in the Channel 4 programme, “A Placein the Sun”. It is located in Budapest’s District 13 along a previously undeveloped stretch of land around a natural lagoon in one of the most scenic and virginal areas of Budapest. As well as fabulous views of the Danube and the Buda Hills, it will offer gardens, promenades, its own shops, leisure and sports facilities ( including a large swimming pool ), restaurants and cafes – all within easy reach of the city centre. The apartments range from 40-140m2 and all have balconies and most have a river view. Priced from only £54,000, an apartment there represents an ideal buy-to-let investment opportunity and a beautiful place to live.

The development is being constructed by one of the largest investors and developers in Budapest, Autóker Holding Plc ( www.autoker.hu ).

Hungary Property Ltd ( www.hungaryproperty.net ) provides a complete service for residential property investors. The company is a partnership of property experts from the UK and Hungary with over 30 years experience of the real-estate market in Budapest. The company’s objectives are to source and secure investment opportunities in the most exciting and financially rewarding new build developments, whilst making investment easier and minimising capital risk.

2005-09-18