Danube blues

When John Harrison, a banker from London, bought his first flat in Budapest with a group of friends in early 2008, his reasons were financial, but emotional too. “I thought that business would gradually move east and Budapest would become a hub for the whole region,” he says. “There were already plenty of expat professionals there, so letting the unit out looked like a good bet. On top of that, the city is beautiful and atmospheric.”

Harrison and his friends bought two more apartments which, like the first, needed thorough renovation, including installing extra bathrooms. He describes his gross annual rental yield of around 7 per cent of his investment as “very positive”.

But as far as capital value is concerned, Harrison says recent political and economic turmoil in Hungary is “not good news at all”. The forint has come under sustained pressure in recent weeks, driving the currency down to its lowest-ever rate against the euro; a pound now buys 15 per cent more forints than this time last year.

According to Tamás Bánlaki, general manager of the Engel & Völkers estate agency for eastern Europe, sales of homes in Budapest were 60 per cent lower in volume in 2011 than in 2007, the last year of the boom in Hungary. He says Russians are increasingly interested in buying high-end homes in the city but the number of “opportunistic” buyers taking advantage of the devalued currency is relatively low.

On average, the value of property in the city has fallen by around 30 per cent over the past five years, including a 5 per cent drop in 2011, according to Bánlaki. An increase in the number of distressed properties coming on to the market in the last quarter of 2011 may push values even lower.

This is bad news for speculative investors, mainly from the UK, Israel, Spain and Ireland, who flocked to Hungary in the middle of the last decade. Most of them bought flats in Pest, the commercial heart of the city on the left bank of the Danube. Buda, on the right bank, tends to attract expat families.

Some of those who bought property before the crash, particularly at the lower end of the market, have had a rough ride. Typically, the rental income from these properties was never high or reliable enough to cover mortgage costs. Many investors cut their losses and sold up; some buildings in the charming Jewish district, which was a target of speculative investment, appear unfinished – casualties of the wider recession as much as of the plunge in values.

Bánlaki estimates that upmarket central apartments sell for €4,000-€6,000 per sq m depending on location, furnishings and, crucially, views over the Danube. But some buyers of carefully renovated, high-end units of around 150 sq m have found a surprising niche market: the film industry.

“It’s a massive success story,” says Catherine Dickens Gore, a descendant of Charles Dickens who moved to Hungary 10 years ago and set up as an interior designer. “The studios are booked out with big productions for the next year or more. They all require modern, downtown apartments for film crews, who want all-in rentals for anything between three and nine months.”

Angelina Jolie’s directorial debut, In the Land of Blood and Honey, was filmed in and around Budapest. Jolie’s husband Brad Pitt was in Budapest last autumn to shoot part of World War Z, a feature to be released this year. And many in the city are excited about the imminent arrival of Bruce Willis for the fifth instalment of the Die Hard series.

For the non-film crew visitor, too, Budapest can be a bargain. Peter Grundberg, co-founder of Brody House, a guest house and arts club in the city, says that the combination of a skilled workforce and strong creative industries augurs well for the future, “but you get the sense that Hungary is operating at half-capacity and there is an urgent need for the government to cut red tape”.

Dickens Gore, who runs an estate agency in parallel with her interior design work, is offering a new, fully-furnished 160 sq m penthouse in the Palazzo Dorottya, a block from the Danube, with a 50 sq m terrace, two bedrooms, two bathrooms and two parking spaces, for €1.1m. The price includes 27 per cent VAT, which is levied in Hungary the first time a property is transferred. Second-hand property is subject to a transfer tax of 4 per cent. Much luxury property is traded in euros, particularly if the buyer or seller is from overseas.

Wiclo, an Anglo-Swedish developer, is selling a three-bedroom, 160 sq m loft unit in a restored building, a short walk from the designer stores on Andrássy Avenue, for €500,000.

Both these properties are in central Pest; €500,000 could also buy a comfortable detached house in leafy Buda. Homes with small vineyards attached are available within an hour’s drive of Budapest for as little as €120,000; €1.5m buys an estate with spacious grounds on the outskirts of the city. Hungary has very few homes for sale above this price.

“The top end of the market is still active,” says Nicholas Leigh-Wood of Midas European Property. “International buyers can get decent yield and even rental guarantees. There are some good deals to be done.”

Buying guide


● Easy access by air from the UK

● Handsome, compact city

● Good-value property across all price ranges


● The economy is not performing well

● Renovations can be very expensive

● Currency risk

What you can buy for ...

€100,000 A two-bedroom unit in a central district in need of refurbishment

€1m A three-bedroom apartment in a secure, modern building with Danube views and private parking







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