Since 2001 the Hungarian economy has been growing steadily two percentage points faster than the EU average and the level of development is thus converging relatively quickly on the EU average.

Business confidence is strong, with most businesses having a favourable outlook. Investment is positive, fed by a largely favourable export outlook and the continued influx of foreign capital. Consumer spending should continue to grow moderately, facilitated by improved employment prospects amid increasing business activities.

With Hungary's accession into the EU in May 2004, the country and in particular Budapest is on its way to become one of the biggest economic engines of Eastern Europe. However, in comparison to other EU countries, property prices in Hungary are relatively low, but forecasters warn that things will not stay this way. Hungary is set to benefit from EU funds and stricter regulations will be enforced leading to greater stability in the market.
Property investment in Hungary is mainly centered on the capital city of Budapest where prices are currently at least 25% cheaper than similarly attractive European cities like Prague, and where property prices in the most desirable districts rose by up to 15% last year.

It is reported that typical levels of appreciation for properties in well-located areas have risen by up to 15% per annum and average rental yields between 6% to 8% have been achieved.

A foreigner who wants to buy property in Hungary can either buy through establishing a company, which qualifies as a Hungarian entity, or purchase the property as a private individual.

Buying Property in Hungary

Buying as an individual can offer a simple solution for a number of reasons including: no set-up time, no Hungarian bank account is needed; less administration and red tape. However, there are a few negative points to consider, including: limited expense recognised as cost when calculating Capital Gains Tax when you come to selling the property; no expenses deductible on rental tax calculated on income; and receiving a permit may take up to two months although you should still be allowed to take possession of the home.

However, if you form a limited company, between a husband and wife for example, you will be entitled to a lower tax rate when you sell the property. A company pays a tax rate of 16% after selling a property, compared to 20% when a private individual sells a property. However you choose to buy, one extremely important aspect is to ensure the authenticity of the title and deeds, so make sure your solicitor thoroughly checks their origins.