Real estate is traditionally considered a safe investment. Prices are constantly on the rise, at least to the keep up with inflation. Now, after more than 2 years of pandemic and half a year of war, prices are still increasing in Hungary, while new patterns of demand are emerging due to a recent change in energy price subsidies.
Real estate investment
You can buy real estate both as a short-term or as a long-term investment. As a short-term investment, you can get the real estate renovated and sell it again for a higher price with the added value. As a long-term investment, you can use the property as a rental as long as you want, and sell it whenever you need cash again. Since prices are constantly going up, you will not lose on the business even if you do not modernize it significantly.
Energy price subsidies in the mix
A fairly new element in real estate prices, both for rentals and sales, is energy efficiency. Over the last decade or so, energy prices have been artificially kept low by the Hungarian government. Now, starting from September, energy price subsidies are restructured in a way that they are available to significantly fewer households.
As a result, the importance of expected utility prices will have an increased weight in decisions involving both the rental and purchase of real estate. This is obvious in how more and more people ask about energy efficiency features and alternative heating methods available at the property they are interested in.
Most popular types of housing
In line with this, new patterns are already emerging regarding the types of real estate people are looking for.
- On the one hand, newly built and recently renovated homes usually have a high energy efficiency, which can reduce energy consumption, and as a result, utility prices.
- On the other hand, apartment houses with district heating are becoming more popular, since district heating seems not to be affected by the new energy price increase. This is especially true for towerblocks or concrete blocks of flats that have been recently renovated and insulated, or at least where new, modern windows have been installed that prevent heat leaks.
Accordingly, the prices for less energy efficient homes are expected to decrease.
Countermeasures to property devaluation
Energy efficiency investments can compensate for the abrupt value loss caused by the unexpected repeal of energy price subsidies. Such investments may include the installation of split AC units that can provide both heating and cooling, or heat pumps that are alternative solutions to the otherwise popular gas boilers.
However, implementation of such measures takes time and capital, which is not available to every homeowner. Moreover, there is a shortage of skilled construction workers, which prolongs the execution of such plans, even if one has the necessary finances.
Real estate price tends
The last few years have bought a very steep increase in property prices. While prices are still climbing, a slowdown is becoming perceptible on the market, reflected in the number of purchase agreements reported to the Land Registry. This deceleration will surely be reflected in the prices too, eventually.
Compared to last year, the most obvious trend is an increased interest in smaller homes. Last August, about 57% of people were looking for individual houses and 43% for flats or apartments. This August, their ratio was more balanced, with 51.5% looking for houses and 48.5% looking for flats.
Property investment safer for the long term
When you invest in property, the longer the term, the more costs you should expect connected to maintenance and the prevention of amortization. However, especially in the current environment, where it is expected that the price increase will gradually slow down, it makes more sense to plan for the long term, and seek a steady income.
Real estate investment is still one of the safest forms of investment in Hungary. Moreover, it is an easy path if you are seeking Hungarian residency: if you set up a company, purchase real estate, and rent it for a steady income, you and your entire family become eligible for a Hungarian residence permit that is equivalent to a Schengen visa. (Learn more about this option here.)
Helpers Finance offers precise and dependable accounting services that can help you make the most of your Hungarian business. That remains true even if you decide to invest in real estate as a form of keeping up a lucrative enterprise.
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