Budapest landlords enjoy high returns on rented property

Sustainability

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Gross returns on rental of residential property exceeded 7% in both Budapest and several Hungarian cities with universities. This is exceptionally high not only compared to other capitals in the region, but also in European comparison, shows the Deloitte Property Index, a comparative report of residential markets and housing across Europe.

The sixth edition of the annual Deloitte Property Index compares residential property markets in Europe. The report analyses the factors that influence the development of residential markets and compares prices in a number of European countries and cities, according to the firmʼs website.

For the first time, the sixth edition of the index examines returns on leasing residential property. According to its findings, the highest percentage of those living in rented accommodation is in Germany (54.3%). Of all European countries, Hungary has the second lowest percentage of people living in rented accommodation (3.9%), higher only than Slovenia (2.4%), a press release sent to the Budapest Business Journal shows.

Returns on residential property are lowest in London (2.0%), while in Budapest they are extremely high, at 7%, surpassed only by Denmark (8.9%).

The report also analyses average residential property prices across the countries reviewed. In Hungary, the average selling price of new homes was EUR 1,140/square meter in 2016, which translates into an annual growth rate of 9.7%. Prices in Hungary continued to rise in 2017, albeit at a slower pace in the first half of the year.

Prices of new homes in the capital cities of Prague (EUR 2,368/sqm) and Warsaw (EUR 1,729/sqm) are still substantially higher than in Budapest (EUR 1,480/sqm). London (EUR 16,538/sqm) and Paris (EUR 12,374/sqm) head the list, the two cities where residential property is traditionally the most expensive.

Of the countries reviewed, the Czech Republic had the lowest interest rates on mortgage loans, at 1.77%. The Czechs topped the rankings in another category as well: according to the report, citizens need to save an amount equal to nearly 11 years of average salary if they wish to buy an average-sized home (70 sqm), while the equivalent figure for Hungary is 8 years.

Due to the steady growth of property prices over several years, opportunities for people in Hungary to buy their own home have become somewhat less favorable, and Hungary is now in the top third of the middle ranks in terms of this indicator.

At the same time, a broader range of government grants and the wider availability of bank loans has resulted in substantial improvement in the ability of certain population groups (e.g. families with several children living in provincial towns) to buy their own home, the Deloitte report shows.

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