Letting out to become more profitable in Hungary

As we reported, rental prices have been increasing unstoppably for years in Hungary. Thus, it is more and more impossible to find an affordable apartment or even a room in big cities. According to Magyar Nemzet, letting out might become an even bigger business from January on, because the government reduced the relevant taxes radically.

 Yields increase, letting out becomes even more profitable

Ákos Balla, stated that demand for rents has not changed, so it is unlikely that owners would lower rental prices. As a result,

remarkably high rental prices might remain

– added the owner-manager of Balla Ingatlanirodák, a Hungarian real estate agency.

In fact, individuals letting out their real estates have to pay currently a 15% VAT and a 14% health insurance contribution. However, parliament abolished the latter from January next year. This could mean lowered rental prices, but demand is so high that the additional income is expected to remain at the owners. Thus, letting out a flat will become even more profitable from next year on, than it was before. Since demand is permanent a 12-20M forints (EUR 38,000 – 65,000) invest means an

approximately 4-5% yield now, which might increase to 7-8 percent next year.

Students and young employees are the ones mostly in need of rooms and flats

In fact, rental prices only have lately risen by a few percents lately, but they show significant regional differences. For example, the average price for a square meter without utility bills in Budapest is 2-3,000 forints/month now (EUR 7-10), but in some more popular parts of the city one can bump even into 4-5,000 forints/sqm (EUR 14-17). In contrast, rents are much lower in the countryside, approximately 1,500-2,000 forints/sqm (EUR 5-7).

Of course, the highest demand for rentable flats is in Budapest and big cities like Győr, Pécs, Szeged, Debrecen and Miskolc. This is not surprising since these are university centres, as well. However, more and more would like to rent flats or rooms in regional centres like Kecskemét, Eger, Dunaújváros or Szombathely. To tell the truth, these are only small centres regarding higher education, but important hubs regarding car-industry and attached companies.