Hungary Property Possibilities
Having intently watched the debate over property investment in Hungary and in particular Budapest, with equal numbers denouncing the country as an economic blunder as those proclaiming it to be the next property gold rush, we were eager to see how the first country to shed the shackles of the Iron Curtain stacked up in reality.
About the same time it takes to travel from London to Bradford up the British M1, from leaving Bratislava centre we reach Budapest in just 4 hours following the majestic Danube river as its snakes its way south via the Hungarian M1 and M15 motorways which connect Slovakia with the Hungarian capital city. We began our journey into Hungary by first adding to our windscreens now growing collection of motorway vignette stickers, again it seemed this is just something you should know but at 1530 HUF (Hungarian Forint) works out at just over 5 euros for a 4 day pass you are definitely getting value for money! Major infrastructure upgrades mean the M15 should become 4 lanes by 2009.
Two hours to the south of Budapest via the M7 lies Lake Balaton, often referred to as Europe’s largest puddle given the shallow depth of its waters and since Hungary is landlocked it has become the summer hotspot of choice for the Hungarians masses with the largest resorts on the south lakeshore emitting an ‘Ibiza vibe’ attracting younger crowds of partygoers to the summer nightlife whilst the north coast which sits within national park area is renowned for its wine growing abilities and home to one of the best thermal lakes in Europe, Lake Heviz. Notably set to become DHL’s second Hungarian airport base at the end of August, the new Flybalaton airport began accepting significant charter airline traffic from 2005 and since Ryanair began London Stansted Balaton flights in early 2006 and other European cities begin operating new routes to the regional airport, future traffic forecasts for Fly Balaton are approx 300,000 visitors in 2008 up from just 21,000 in 2004.
This explosion in visitor numbers has logically resulted from the accessibility of the Lake Balaton region to tourists and hot on their heels, holiday home buyers in search of a cheaper lakeside alternative to France, Italy or Austria. It will come as no surprise therefore, that 50% of all domestic Hungarian tourism trips during the peak summer 2007 season will be to Lake Balaton according to Hungarian Tourism Zt equating to nearly half a million visitors to the region.
Projects such as Zala Springs are cashing in on Lake Balaton’s mushrooming tourism demands and Hungary’s distinct lack of golf courses with currently just 7 in total and are marketing “golf, wine and baths” to international investors and second home buyers. The Robert Trent Jones course is set to be ready for tee off by Spring 2008 whilst the nearly 400 apartments and town houses should be complete by the end of 2007. This region should open up drastically when the M7 extension to the Croatian border concludes in Spring 2008 officially connecting Budapest with Croatian capital of Zagreb.
The M1 first linked Budapest to Austria back in 1996 and thinking back to our mind numbing traffic jams in Vienna, the quality of the Hungarian motorway roads here is impressive. Since EU accession in 2004 and courtesy of EU grants and institutions like the EIB (European Investment Bank) and the EBRD (European Bank for Reconstruction and Development) which formed in 1991 to offer support to central and eastern Europe and ex-soviet countries trying to nurture a new private sector in a democratic environment, these organisation have assisted Hungary in financing its major road infrastructure projects and Hungary is putting the money to good use, between 2007 and 2015 there are no less than 10 new motorway plans in the pipeline.
Our route to Budapest passed by the secondary Hungarian city of Gyor. With numerous claims bandied about that the gold rush to invest in Central Europe’s capital cities has all but been exhausted, attention is turning outwards to their periphery where the ripple effect on secondary cities may be the source of lucrative future real estate gains.
Budapest is often referred to as the Paris of the East but the historic buildings to be found in Hungary’s second richest town, outside of Budapest, has won Gyor European awards for its preservation of not only these edifices but also its reconstruction of the city’s Baroque centre. Today, a well developed educational system has been the foundation for Gyor’s development into a highly industrialised centre thus attracting an international spectrum of foreign direct investment. The Gyor Ipari Park was one of the first Hungarian business parks to develop high level infrastructure. It is situated just 5km from the city centre, borders the principal Vienna-Budapest railway line, lies just off the M1 motorway and is a short distance from regional airport in Pér which was enlarged with EU support back in 2003. Furthermore, 15 km from the 126 hectare business park, lies Gonyu (soon to be home to one of the world’s most efficient power plants) where at the junction of the rivers Danube and Mosoni-Danube, there is a modern harbour. Gonyu is set to connect to Gyor in 2008 via brand new 50m USD railway line.
The Gyor Business Park is home to tenants such as ADESTAR Hungary Kft a Hong Kong based company, Ferroglobus, a member of the Thyssen group and an important trading company on the Hungarian iron and steel market and Philips Kft which has made the park its world centre for DVD-production.
Gyor Ipari Business Park is an Austro-Hungarian joint venture and is firm evidence of countries making a big effort to market their countries’ business advantages. Enjoying a location at the heart of Europe, pursuing political and economic stability over the past 15 years, implementing transparent political and legal system and improving investment legislation has resulted in Central and Eastern European countries like Hungary labelling themselves as industrial locations offering a favourable business climate. Special economic zones and technology parks such as Gyor Ipari Business Park coupled with exceptional tax incentives and government subsidies are luring the worlds foreign investors in droves.
The ability of Hungary to attract major investors such as Nestle, Chinion and Unilever has pushed it up from 19th position to 11th on the FDI Confidence Index, recent decisions by firms such as Panasonic and Canadian car parts manufacturers to make Hungary its European headquarters have lead to sharp increases of FDI flows into Hungary prompting strong economic growth forecasts however despite this, its principal economic challenge remains getting its financial house in order which means budgetary disciple, effectively reducing its debts and raising the country’s low employment rate all of which are hampering Hungary’s efforts to adopt the Euro and have meant European Monetary Union membership has been put back from 2010 to 2011-2012 possibly even 2013.
Many countries offer commercial zones and business parks as incentives for investors to settle and since 1991 the Hungarian government initiated over 160 business park projects and under the New Hungary Development Plan until 2013 businesses can apply for HUF 273.2bn in direct and indirect funding for developing industrial parks. Today the Gyor Business Park is home to 72 companies from 10 different countries and it labels itself as a prime well-connected location with excellent infrastructure and services which for international corporations equates to a trouble-free relocation process.
Back in 1992, AUDI AG selected Györ as its new production location opening a new engine plant less than two years later. Production of Audi TT models in Hungary commenced in April 1998, final assembly of the Audi A3 commenced there in April 2001.Almost the entire range of Audi engines is now produced in Györ and Audi hopes it will start production of the Audi A3 Cabriolet by the end of this year.
A duty-free area offers Audi the flexible delivery and collection of production components and engines and together with a good supply of skilled workers and highly qualified graduates from the Institute of Technology a workforce of around 4,900 has been employed here since 2001. In total, more than 145,000 of the Audi TT Coupé and Audi TT Roadster have left the Györ assembly lines making Audi AG, Hungary’s biggest exporter.
The positive effect new business is bringing to Hungary’s cities and towns is fostering steady long-term economic growth which forms the basis for a healthy real estate market. Budapest naturally lies at the heart of Hungary’s property market being the capital city and where once decrepit, war damaged art nouveau blocks lined the boulevards, today the city has blossomed into a capital city to rival its western counterparts. The failure of Hungary to yet join the Euro still makes Budapest one of the most attractive European centres in which to buy property, here decent real estate can still be bought for between €1800-€2000 a sq m which compared to €10,000 in Paris and the more costly surrounding capitals of Sofia, Krakow and Bratislava, Budapest still remains cheaper by comparison. The decision not to introduce a property tax is yet another draw which over the past six years to date has brought investors good capital growth returns.
Upon crossing the Lágymányosi Bridge over the Danube, we enter the Pest city limits but mistakenly heading south following the river and passing by the recently built National Theatre next to the Palace of Arts which was completed in 2005. The rapidly developing IX district turns into the XXI Cespel district which we later learnt used to be the centre of communist heavy industry, which remains very much in evidence through unkempt, heavily industrialised neighbourhoods and a working class atmosphere but signs of development are underway with at least two brand new shiny Tesco’s hypermarkets spotted and plans to establish a ‘mini Manhattan’ here. As you make your way back north into the central districts the full beauty of Budapest hits you, arriving at night, the spectacular Basilica and Parliament building illuminated leave you open mouthed at the sheer radiance of this city.
Gliding by waterfront eateries, grandiose apartment buildings, contemporary office blocks and riverside boat moorings, the appeal of Budapest hits you instantly. Like Paris, every district is a neighbourhood exhibiting its own characteristics and ambience and it’s difficult to identify bad areas from good. We finally make it to the hotel at midnight clueless as to our whereabouts in relation to Centreville but already we understand why owning a little piece of Budapest real estate holds so much appeal.
