Buying property in Hungary: what to pay attention to?

Buying property in Hungary is a relatively simple and quick process.

However, there are a few rules to keep in mind to avoid any unpleasant surprises.

Like any real estate market, there are specific characteristics to consider. These include legal and technical aspects, as in any market, but also specific characteristics unique to the Hungarian real estate market, which has been attracting particular attention from foreign investors for several years.

Buying property in Hungary: European or non-European

The first thing to distinguish is whether or not you are a buyer from the European Union.

• If you are from the European Union, you can buy under the same conditions as Hungarian nationals
• Otherwise, you will need to submit a prior permit application. This is a purely administrative formality.

Also note that it is not possible, whether you are a European citizen or not, to buy agricultural land, except by considering the creation of a Hungarian company.

Real estate market research in Hungary

The Hungarian real estate market has been the fastest growing European market since 2015. Budapest was still the European city with the highest growth rate (19%) in 2018.

This is a market that has been booming for several years, so it is not surprising to find many agencies offering properties.

However, caution is necessary.

Many agencies (especially large ones) inflate prices, fully aware of Budapest's international appeal and the strong foreign demand for investment.

Therefore, we cannot advise you to compare agency prices with official market statistics, district by district, neighborhood by neighborhood. It is important to understand the market (sales volume, sales history over the last 12 months in a specific neighborhood, etc.) in order to quickly identify good deals and avoid overpaying for a property, even a renovated one.

Real estate in Hungary is in high demand

The importance of understanding the market is reinforced by the need for responsiveness. Competition from both foreign and local investors is intense, meaning that a lack of responsiveness is quickly penalized.

The specific characteristics of certain properties in Hungary

Since Hungarian is a relatively complicated language, it is not always easy to understand the content of some advertisements, especially when legal or specific terms (difficult to translate) appear.

Here are two situations that are regularly encountered in the Hungarian real estate market:

Bérletti joga: the right to use the real estate

When you spot a property and the ad highlights the term "berleti joga", it is not a classic sale.

What is being sold is the usufruct (the right to use the property) and the price displayed is therefore the price of this right.

The potential purchaser of this right will only be able to acquire the property (the right of ownership) after a minimum period and under specific conditions.

Furthermore, only Hungarian citizens are eligible. This is a social measure for people who do not have sufficient income to purchase property rights.

The right of pre-emption: a right of preference for real estate

Buying property in Hungary means appreciating Hungarian architecture, which is in the tradition of Viennese or Parisian buildings. Therefore, it's not surprising that the government has a right of pre-emption (a right of preference) on certain properties.

There is a map of the streets and buildings covered by this measure, but it is best to check with the condominium association regarding the situation of the property.

In practice, this means that the administration will be able to use its right of pre-emption for up to 60 days to obtain the property under the same conditions (price) as you.

Do your due diligence on the property

With the growth of the real estate market in Hungary, the number of real estate agents has also skyrocketed.

However – as everywhere – it is not reasonable to blindly trust the information provided by them.

Always ensure that you verify all information provided with the help of a team or law firm.

For example: the condition of the co-ownership, the financial aspect of the fund, past and future renovations…

Lawyers in Hungary: their skills and their price

In Hungary, the lawyer is the preferred intermediary. He is the one who takes care of the preliminary research (land registry, ownership verification, potential debts, etc.) as well as the drafting of legal documents.

We must distinguish between:

The initial purchase offer for the property

ad hoc purchase offer including the essential conditions (property characteristics, price, deposit, date of signing the final deed…).

It should be noted that if the buyer subsequently withdraws from the contract, the deposit will be forfeited. Similarly, if the seller subsequently withdraws from the contract for a reason not attributable to the buyer, the seller will be required to pay compensation equal to twice the amount of the deposit.

The buyer is therefore well protected even at this stage.

The final sales agreement

The final deed of sale can be signed at any time. The parties are free to decide on the signing date and payment terms. There is therefore complete flexibility.

For example, the parties may decide to sign the final deed within two weeks of signing the purchase offer. They may also decide to pay a defined percentage upon signing the deed and the remainder at a later date. The parties' wishes prevail.

Registering your property with the land registry

The law firm will handle the necessary administrative procedures. You will then receive the deed of ownership. The land registry notice and the request to pay the registration fees (4%) will follow within 90 days.

Lawyer's fees in Hungary

The lawyer's fee is a fixed amount and is not fixed. Each firm is free to set its own fee.

However, be aware that the standard fee is around 1% of the purchase price. If a firm offers to charge you double that, we strongly advise you to be cautious.

‍