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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.

Example

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 running costs.

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 Hungarian Will.
  • 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 estate.
  • 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 concerned.

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:-

  1. In your own name
  2. In the joint names of you and your husband / wife or co-purchaser(s)
  3. In your children's names or in the name of somebody who will eventually inherit the property from you
  4. In the name of a limited company, whether English, Hungarian or 'off shore'.

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.

Rental Income

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.

Inheritance Taxes

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.

Specialist advice

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.