Buying Property in Hungary
Why should you invest in property in Hungary? Because of the world financial
situation people want to spend less, where can you buy for less? Right
now you can take advantage of amazing low prices of properties in Hungary,
the undiscovered jewel within the European Community.
Purpose built apartment on the banks of Lake
Balaton. Built 2004 - 68 sq. yards, 2 Bedrooms, Balcony - 100 yards
from lake Excellent amenities close by - Price £35,000. Expected
Rental yield of 6% pa. - Excellent potential for capital growth. We
can arrange the letting and management of your property.
Buying Property in Hungary – The Facts
- The legal system in Hungary is different from the English system
- Is the process of buying a property in Hungary similar to the process
in England? No, the Hungarian legal system is very different from the
English. Generally speaking, however, provided the necessary checks
and enquiries are made, there is hardly any more need to worry about
buying a property in Hungary.
- Can you make all the same checks that you would make in Britain? –
No. As the systems are very different you can only do what is normal
in the country where you are buying the property. In just the same way,
you would follow a totally different procedure if you were buying a
house in Scotland from the procedure that you would follow if you were
buying a house in England.
Buying as an investment in Hungary
Many people are buying property for investment purposes. Some want
a holiday home that will also make money and cover all or part of its
What should I bear in mind when looking for a property in Hungary?
- The first point to bear in mind is that Hungary is a 'new' country
as far as the overseas property market is concerned and will continue
to evolve as it emerges as a fully free market and member of the European
Union (which it joined in May 2004).
- Buying a property in an emerging market country such as Hungary is
pretty well the same as buying a property in, say, Spain or France.
It is perfectly possible to buy property with its history properly and
legally recorded. You just need to be particularly careful and get good
legal advice before you commit yourself to a purchase. GLM will assist
you throughout the purchase process.
What is the process of buying a property in Hungary?
- GLM will assist you throughout the buying process
- Once a price for the property has been agreed a reservation contract
needs to be signed
- Once the reservation contract has been signed there is usually a period
of two to four weeks in which the Hungarian lawyer will carry out checks
and searches on the property.
- Provided checks are satisfactory you then sign the Preliminary Contract
and, usually, pay over a deposit of 10% of the price on a resale property
or on a property in the process of being built a down payment of, perhaps,
30% on a new or 'off-plan', there then usually follows a series of stage
payments as the construction process progresses.
- As soon as everyone is ready to proceed or once the property has been
finished the Final Contract is signed. This is the document transferring
the right of ownership to you.You then pay your various fees and taxes
and then the property is registered at the Land Registry in your name,
at this stage the final payment or the mortgage is arranged.
- Legal fees are normally a flat fee of £1,000 which includes
all searches and disbursements
- You will receive 2 contracts - one in English and one in Hungarian.
Loans & Mortgages
- Financing the purchase of the property in Hungary may take several
forms depending on the circumstances. For example: 1. A first (or second)
mortgage on your existing UK property 2. A mortgage on the Hungarian
property from a Hungarian lender
- Hungarian mortgages do not follow the same pattern as UK mortgages
secured on UK properties. The loan is usually limited to 70% of the
assessed value of the property – our experience is that it is
usually nearer 50% of the true value – and by the ability of the
borrower to repay the loan, all strictly calculated in accordance with
Hungarian rules that are very different from our own. Standard repayment
mortgages (where you repay both capital and interest) are the norm,
though interest-only mortgages are available from some sources. The
term is usually shorter than an UK mortgage – typically 15 years.
Do I need permission to buy a property in Hungary?
- In general, foreign individuals can purchase and own real estate in
Hungary provided that they obtain official permission from the municipal
authorities. The buyer's lawyer will apply for this permission.
- Once the municipality issues its approval the buyer can register the
real estate in his name in the Land Registry. This is the ultimate evidence
of his title to that specific property. For EU citizens it is likely
that the need for permission will be abandoned in the fairly near future,
though this is not guaranteed. Since 1 May 2004, EU citizens who have
been continuously living in Hungary for at least four years, may purchase
residential property in Hungary WITHOUT special permission.
- Properties in certain protected areas of Hungary e.g. National Parks
may be off limits for overseas investors. The Tihany peninsula adjacent
to Lake Balaton is an example, although
this has now been changed and permission can be asked.
What happens if either I or my co-owner dies?
- Jointly owned property in Hungary does not automatically pass to the
survivor. It will (subject to the limitation imposed by Hungarian law)
be dealt with according to any instructions which you leave in your
Will (either English or Hungarian) or, if you do not leave a Will, under
the rules relating to intestacy.
- Hungarian law imposes restrictions on the freedom of a Hungarian person
to leave their assets as they please on their death but does NOT insist
that foreigners abide by those restrictions. It is generally, much cheaper
and simpler to deal with your affairs in Hungary if you have made a
- Rental income - The shores of Lake Balaton will attract a rental
income during July and August of anything up to £200 per week.
A property in rural locations would be less attractive as a rental property.
We can assist with the provision of cleaners
Special points for new properties
From 1 January 2005 new purchases of new property in Hungary at less
than 15,000,000 Forint (about £43,000) can be bought free of property
transfer tax, which is currently 6%.
The Role of the Notary in Hungary
- In most countries, except the UK and other 'common law' jurisdictions,
the Notary plays a major part in the process of buying and selling real
- The Notary is a public official who is there simply to put on the
public record the fact that the title deed recording the sale / purchase
has been signed in his or her presence and understood by the parties
Do I have to be in Hungary to complete the transaction?
The seller and the people buying the property are usually required
to attend in person to sign the documentation. However, if this is inconvenient,
arrangements can be made for a Power of Attorney to be granted enabling
another person to attend on their behalf. This must be in Hungarian
form and signed in front of a Notary.
Is there a Land Registry system in Hungary?
Yes. After the Full Contract / Deed of Sale has been signed it will
be registered at the appropriate Land Registry and for the payment of
any Land Registry fees.
In whose name should you purchase the property?
There are many ways of purchasing a property in Hungary. Even if you
need to buy the property in the name of a limited company you will need
to think about who should be the owner of the shares in the company.
The options available to you include:-
- In your own name
- In the joint names of you and your husband / wife or co-purchaser(s)
- In your children's names or in the name of somebody who will eventually
inherit the property from you
- In the name of a limited company, whether English, Hungarian or
The decision as to who would be the legal owner of the property depends
on your own personal circumstances. In most cases, purchases are made
in personal or joint names.
The personal rate of tax on rental income is a fixed 25% with no deductions
for outgoings. A company would pay only 16% of net income.
The rate of inheritance or succession tax varies from 2.5% to 21%
and is levied on Hungarians who inherit any assets and foreign citizens
inheriting Hungarian assets such as Hungarian real estate.
We can provide advice with regards to removal companies specialising
in UK-Hungary, Satellite TV, Internet connection, setting up a bank
account, the best places to buy furniture, building work, insurance,
standing orders for utility bills, bringing your UK car across and low
cost money transfers. After sales service is key should you invest in
a property in Hungary.