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January 26, 2007 3:19 pm

A Palace Quarter uprising

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Reputations are hard to shake. Ask any Budapest natives about their city’s Eighth District and one of the first images they’ll probably conjure is of downmarket hookers. Poverty, prostitution and decay have long been the defining characteristics of this section of the Hungarian capital and the area called Jozsefvaros, or Joseph Town, after Hapsburg emperor Franz Joseph, remains one of the city’s poorest and most densely populated.

But there is one pocket, less than 1 sq km at the tip of the wedge-shaped district, where it reaches into the heart of Budapest’s downtown, that has made a remarkable transformation over the last decade.

Driven by a district government intent on cleaning up, a big student population from five nearby universities and the voracious appetite of foreign investors, the inner Eighth is a community on the rise. Developers are busy on nearly all of its few vacant lots; private money is pouring in to restore crumbling but magnificent late-19th-century buildings; authorities have brightened once dingy streets with new lights, cobblestone pavements and saplings; parking spaces are being removed and underground garages created; trendy new cafes and restaurants have begun to move in; and, according to estate agents and ­residents, the pace of renewal is only expected to quicken.

“It needs a little more time but it’s a fresh and dynamic area,” says Eva ­Bognar of estate agency Arete 90.

By no means does the inner Eighthcompare to Pest’s grand and nearly fully restored Andrassy Avenue, which runs through the heart of the pricier downtown districts. Nor does it come close to the rich and leafy hills of Buda, across the Danube, where wealthier Hungarians retreat when the working day is done. Budapest’s property boom, which began around 1998, has been slow to reach the Eighth. Even now, with its heavy student population and bohemian feel, it is hard to say the neighbourhood is becoming gentrified. But the difference from five years ago is tremendous.

Thinking back to when he began his studies at Pazmany Peter Catholic University on Szentkiralyi Street, Matyas Fabri, 25, simply uses the word koszos – foul. Fabri, who will next year move on to postgraduate studies at the nearby Budapest Economics University, has, with help from his family, just bought a 36 sq metre apartment in a historically protected building on Mikszath Kalman Square for Ft11.5m (€44,500). He’s typical of the inner Eighth’s new buyers, people who were originally keen to be close to university classes but are now staying put after graduation. “The common fees in my building are cheap. The neighbourhood is full of cafés, which are always full of young people. And I love the architecture.”

Just round the corner, in an eclectic, 19th century building on Krudy Gyula Street, Bognar is selling a 74 sq metre apartment with balcony for Ft23.5m. “It’s a classical apartment with high ceilings and beautiful doors from the 1920s,” she says. She expects it will move within two to three weeks.

Built up largely before the 20th century, the inner Eighth has less early-modern construction than in the more fashionable quarters of Budapest, though some art nouveau can be found. Instead the neighbourhood is packed with a variety of neo-Renaissance styles, especially Italianate. Gothic revival also appears here and there. The best of the architecture comes courtesy of a building boom in the 1880s and 1890s. Budapest at the time was just approaching its zenith as an equal seat of the Austro-Hungarian dual monarchy. Just as massive public works transformed the once provincial city into an imperial capital, the inner Eighth became the trendiest place for aristocrats and rich industrialists to build towering monuments to their wealth and status. To this day it is referred to, though now sometimes ironically, as the Palace Quarter.

Perhaps the centrepiece of the neighbourhood is the neo-Baroque Wenckheim Palace on Szabo Ervin Square, built by Count Frigyes Wenckheim in the last years of the 19th century. Today it houses the Metropolitan Library, with the old ballroom serving as the main reading room. Also nearby is the Palffy Palace, the Hungarian National Radio centre and the imposing Hungarian National Museum.

Jozsefvaros had its poor pockets even in the glory days. Ferenc Molnar’s 1906 classic Pal utcai fiuk (The Paul Street Boys) was set on Pal Street, which sits on the edge of the area. Later, as with the rest of Budapest, two world wars, a revolution and forced urbanisation under communism dealt repeated blows to the elegance of the district. The Eighth suffered particularly during the 1956 uprising against Soviet rule and damage from the fighting can still be seen on the façades of some un-restored buildings. Many of the old palaces, meanwhile, simply fell into disrepair.

The area’s recovery began in a modest wave of redevelopment in the 1980s. A second round of state-funded improvements, mostly concentrating on the inner Eighth, began in 1996. Bela Csecsei, the district’s mayor, also moved aggressively to crack down on prostitution, drugs and some of the district’s seedier businesses. He has been criticised for being illiberal – especially for the surveillance cameras that appeared along the most notorious collecting points for prostitutes – and for neglecting heavily Roma neighbourhoods. But property owners in the inner Eighth have not complained. Prices for older homes have moved up steadily by 10-15 per cent a year for at least the past five years, while new-build apartments have shown the same growth for two to three years, according to agents.

Prices now range from slightly under Ft300,000 per sq metre just outside the inner Eighth to Ft400,000 in the best locations. “Classic” apartments that have been updated are less expensive – for now. Bognar says that a flat she sold two years ago for Ft260,000 per sq metre could now easily command Ft310,000.

One of the newest projects is Passzazshaz, a cluster of buildings planned for a rare vacant lot between Maria Street and Horanszky Street. Built by Swietelsky, an Austrian construction firm, Passzazshaz offers none of the high ceilings, French doors and hardwood parquet floors found in older, more elegant buildings. But Hungarians prefer sparkling new flats to refurbished ­century-old ones and supply is quite low in the inner Eighth. Passzazshaz also offers underground parking – a valuable commodity in an area of narrow streets and too many cars. Of the 98 apartments planned, all but two have been sold with one- and two-bedroom 50 sq metre units priced at Ft20m to Ft21m.

All homes in the inner Eighth are available at about a 10 per cent discount to similar properties in the nearby Fifth, Sixth and Seventh districts. Much of the difference, agents agree, is due to concerns about the area’s seedy underside but the gap is narrowing, partly because of foreign buyers. “The Italians are crazy about this area,” Bognar says. “They like the beautiful architecture and they don’t care about its reputation.”

The mass of students looking for rental properties also forms a strong advantage for buy-to-let investors. In other areas of the capital, a glut of new construction has resulted in high vacancy rates and level or falling rents, especially for large flats. But in the inner Eighth there is no shortage of people looking for a studio flat or a two- to three-bedroom apartment to share.

The district government, meanwhile, is looking to extend its vision for renewal beyond the Palace Quarter. A huge scheme first planned 20 years ago now looks close to getting under way just outside the inner Eighth. The ­Corvin-Szigony project looks to redevelop six blocks of land adjacent to one of Budapest’s busiest intersections. Beginning directly behind the already restored Corvin cinema, a famous ­battle site in 1956, it will include hotels, commercial and residential space. District officials say it will take six to eight years to complete.

If it goes ahead as planned, the project will be another big step in the rehabilitation of Jozsefvaros’s tattered reputation. Andras Sebestyen, director of estate agency Nova Real, even thinks the area could recapture the status it had in the late 19th century. “One hundred years later, history is repeating itself,” he says.

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