Budapest Property Boom – How Big?

Years after housing prices in most European capitals rebounded from the financial crisis, Budapest’s market started to show signs of life in 2015. Hungarian and foreign investors are buying apartments in bulk at prices still below their pre-crisis peak and in the hope of robust returns. Wherever one looks online, from Bloomberg to Google Ads, double-digit returns are promised on Budapest properties. (OK, you probably have to Google the term at least once – which I did.)

But the two things that supposed to deliver the double-digit dream are shaky. 1) Tourism may be peaking, but it won’t be enough. 2) The purchasing power of locals is tanking in the meantime – both as buyers and as renters.


Photo: Erika Pereszlényi

Here are the size and the factors behind the recent investment boom. (Part 1.) 

It is trendy to blame Airbnb for the increasing property prices in Budapest – the press is happily banging on about it, just as it does everywhere else. But the real culprit is a less visible but much bigger factor: a massive drive by government to increase housing prices, sell Budapest properties to wealthy foreigners, and to encourage home ownership through ill-conceived loan policies. (More about those in a separate post.)

Yes, Airbnb puts upward pressure on local rental prices inasmuch as it consolidates opportunity cost of renting an apartment towards the global higher end. But that is not the whole story. In fact, that may be a smaller part of the story.

To understand the whole depth of the price pressure one must look at the general investment and interest rate environment, not just in Hungary, but globally. Yields of the property market has been beating returns on any other form of investment – attracting any liquid capital to the underpriced Budapest property market.


Home prices in Hungary rose for the first time in five years in 2014 after the market, then-dominated by Swiss franc mortgages, collapsed when the forint plunged in 2008. Prices in Budapest soared 13% in the first quarter of 2015 compared to the same period in 2014, according to Duna House, a real estate agency[1], while Eurostat recorded a similar increase to the first quarter of 2016 (15.2%).


According to Eurostat Hungary has seen the greatest annual increase in the house price index year-on-year among the 28 member states of the European Union in the first quarter of 2016 – followed by Austria (13.4%).[2]


Interest rates are still low, pushing savings out of banks and into the property market, while also allowing for low mortgage rates. The government’s first home buyers’ policy has also pushed mortgage rates lower. Interest rates on forint-denominated mortgages has not been this low since the 1980s.


According to Duna House, an agency, 42% of Budapest property transactions were reported for investment purposes in 2016 – while 22% were first home buyers, and 15% upsizing.

This effect is combined with the government’s new subsidized home making loan policy that would provide families with 10+10 million forints (approx. 70 thousand euros) in loans and subsidies to buy a new home in exchange for three children. The conditions for the subsidy are Byzantine and ever changing, but the interest is enormous. Until July 2016, 32 billion forint (100 million euros) worth of subsidies and loans have been applied for in this scheme. The price hike had appeared literally overnight in asking prices – even before any details emerged about the loans, let alone the applications could have gone through. A few months in and home makers are suffering under the regulatory burden while applying for the free money – in the meantime the 20 million forints it promises is losing its purchasing power rapidly.

As a consequence of these three factors, the average asking price per square meter has increased from 220 thousand forints (700 euros) to 312 thousand forints (1000 euros) on Hungarian average – a 30% increase between July 2015 an July 2016 – but asking prices have grown even more in sought-after areas, such as the capital. The most popular districts within Budapest (districts 5., 6., and 7.) have seen an increase of over 40% year-on-year between 2014 and 2015, according to, a property investment agent, while the next most popular ones (district 8. and 9.) both became over 30% more expensive per square meter during the same period. In 2015, Bloomberg quoted government figures and property agents on the glory of investing in Budapest. “Central Budapest is the hotspot for investors offering rentals to visitors, whose numbers rose 15 percent since 2010, government data show. Investors can earn a 20 percent yield on short-term rentals in central Budapest and 5 percent on long-term leases.”[3] The article also helpfully points out that “Budapest real estate was rated the top long-term investment among 35 European cities by in 2014, based on rental yields, transaction costs and regulations.” With press like this, it is hardly surprising that the property market boomed even more in the year since the report came out.

But rent-seeking investments, such as properties are about the least innovative and productive ways of making money. While the government is dead set to chase out innovations of the sharing economy – most recently Uber – they are actively promoting landlording and home ownership through various policies.[4]

Alternative investments, such as the real economy languish in the meantime.

Property funds see unprecedented interest

According to the regular survey of GKI, a think tank, expectations about the performance of the housing market in Budapest are at 9-year high – fueling interest in investment.[5]

According to the Hungarian central bank (MNB) in the last quarter of 2015, Hungarian investment funds handled almost 6000 billion forints, and 11.6% of their investments were on the property market according to The property funds available to the public have seen a boom in the last years. In August 2012, Hungarian property market investment funds handled less than 350 billion forints, the amount grew to 523 billion by August 2015.

Record low interest rate environment is chasing money out of banks and even stocks, and into the property business. The biggest losers among funds were the ones investing in stock, with 63 billion pulled out in the last couple of months, and another 20 billion forints left funds trading in bonds. Property-based funds, however, have seen 14 billion influx during the same period according to That adds to the buying pressure by funds, in order to keep their relatively high returns.

Investment funds are the most active buyers of commercial property in Budapest.


Even small investors are struggling to cash in on the current boom and try to invest in real estate funds. Form August 2016 the first fund is opening with an overwhelmingly residential property portfolio. Apart from actually buying and managing a property, small investors can now invest for as little as under 200 euros a share.

More about the factors behind this boom, the government’s ill-conceived homebuyers’ loan policy, and the real size of the Airbnb impact coming soon.

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[4] Members of government and the ruling party also show an extraordinary interest in everything real estate. Scandals and accusations about shady property deals and cronyism galore, while the central bank also spends an unprecedented amount of money on buying up property – not just in Budapest, but castles and villas on the countryside.


9 thoughts on “Budapest Property Boom – How Big?

  1. This sounds great, but in reality you are buying into buildings that are decaying and require huge investments to keep them maintained. They are not in the same quality as you will find in other cities. The local infrastructure and general condition will be generally be quite appalling, and residents cannot afford renovation costs. Bear this in mind when investing in property in Budapest especially.

    Liked by 1 person

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  8. Thanks for this article.. I have toyed with the idea of purchasing property in Budapest on and off since 2012.. still haven’t done it and probably won’t unless I relocate there. This was a very interesting article and I look forward to the next installment. Thanks again!

    Liked by 1 person

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