Budapest has been Hungary’s cultural, political and commercial heart since the towns of Obuda, Pest and Buda officially united in 1873. The city, which spans both banks of the Danube, is known as one of Europe’s most beautiful, but it has its share of scars – it was destroyed by the Mongols in the 13th century, captured by the Turks in the 16th century, and nearly destroyed again by Soviet troops in 1945. Some 30,000 buildings were destroyed during World War II and in the 1956 Revolution, and the past still lurks on the peeling architectural details of historic buildings.

However, since the end of the Cold War, the city has undergone yet another renaissance. In recent years previously neglected neighbourhoods, like the 7th district, have been transformed into edgy cultural hubs complete with galleries, cafes and performance spaces. More and more restaurants, shops and boutiques have opened their doors and a new metro line now links the colourful hills of Buda, with the wide boulevards of Pest.

The property market is also gaining momentum. Values in Budapest fell sharply during the financial crisis (over 11% between 2009 and 2012), but since 2014 investors have begun taking advantage of prices still below their pre-crisis peak. In 2014, the average price for a renovated apartment in the city centre was USD 1,700 per square metre, half as much as Prague and a fraction of London or Paris.

Prices are rising and in 2015, Budapest values increased 15% from a year earlier, a trend that appears to be continuing this year. “In 2016 we have experienced a dramatic increase of prices, especially in central Budapest areas”, says Ágnes Kacsmarik, a broker with Engel and Volkers in Budapest. “In the central Budapest areas and the Buda Hills, the prices are about to exceed the pre-crisis level”.

Nevertheless, Budapest real estate is still a relative bargain says Gabor Sooki-Toth, Head of Research at Otthon Centrum in Budapest. “Current price levels are around EUR 800 – EUR 4,000 (USD 900 to USD 4,486) per square metre… way below the average levels found in other European capitals”, he says. The most coveted properties in the high-end sector are villas located in the leafy suburbs, particularly the hills of Buda, which offer panoramic views of the city.

Demand for homes currently outpaces supply, another change from just two or three years ago. “There is high demand for almost everything in Budapest, especially in the lower price segments”, Sooki-Toth says. At the lower end, Budapest properties sell for between EUR 50,000 and EUR 150,000 (USD 56,000 and USD 168,700). The most coveted are apartments that face the riverfront in the historic centre.

Recent government measures reduced the VAT on newly built apartments under 150 square metres in size, from 27% to just 5% and this has triggered a burst of development activity, says Ágnes Kacsmarik. “All of a sudden the number of building permits has multiplied”. Local developers Biggeorge were one of the first to establish a portfolio of high-quality new-build properties downtown. Their ‘City Collection’ includes several apartment houses located in the trendy 7th district close to theatres, museums and restaurants, and their compact modern layout is ideal for investors looking to rent out their flats.

Foreign buyers in Budapest predominantly buy for investment purposes and focus on the 5th, 6th and 7th districts. Agents say rental yields range from 4–10%+. Buyers from China, Vietnam, India and other Southeast Asian countries are active in the market, and a growing number are using Hungary as a base from which to access the EU. The Hungarian government also offers an investment immigration bond program, exclusively for Chinese nationals, with a minimum bond purchase of EUR 250,000 (USD 281,000). This, along with the fast-track process of gaining permanent residency — six months rather than the five years required in other Schengen countries — is luring investors.

As new neighbourhoods continue to regenerate, agents say areas to watch include the 8th district in Pest, particularly the neighbourhoods around the new water sports centre hosting the 2017 FINA World Championships, as well as the 6th district in Buda, both in the garden city suburbs now accessible via metro, and along the Danube where investors from Qatar are planning a new mixed-use district.

“With around 8,000 to 9,000 units to be completed within the next 1.5 to two years, some of the new projects that target mainstream domestic demand may face competition”, Sooki-Toth says. “However, the ones offering unique perks can expect further price hikes of between 10% and 30% year-on-year”. Kacsmarik also expects prices to continue rising. Major geopolitical disruptions notwithstanding, she predicts prices will continue to approach the levels of other regional capitals like Prague and Warsaw. “Currently the prices in these cities are about 20% to 25% higher than in Budapest”, she says.

Neo-Baroque Style Villa

Located in the hills of Buda, this recently refurbished 1932 villa totals 658 square metres on a 1,3000 square metre corner plot. Includes 4 bedrooms, spa oasis with heated pool, saunas and steam room, built-in audio-visual system from Bang & Olufsen, automatic shades, gourmet kitchen with Miele appliances, security, elevator, wine cellar for over 500 bottles, drip irrigation in the garden and the terraces and a separate staff apartment.

Price: HUF 990 million (USD 3,595,069), available on www.engelvoelkers.com/hu

Elisabeth Residence

This modern apartment complex is designed for investment purposes and is located in the historic quarter, popular among tourists for its trendy restaurants, boutiques and cafes. Includes 140 apartments ranging from 24 to 64 square metres. The 2-bedroom penthouse spans 66 square metres and has a 56-square meter terrace. Scheduled for completion in 2018.

Price: HUF 23,041,952 to HUF 86,409,839 (USD 83,500 to USD 313,122) available on, www.biggeorgeproperty.hu

Text by Sophie Kalkreuth 

This article was first published in Palace Magazine