In the last months we can hear more and more about the rising rental prices on Budapest's real estate market. Some people think that only Airbnb is responsible for that, but the picture is more complicated.
Related: Online renting drives the price boom in Budapest
The number of people who come from rural areas to Budapest for work are increasing significantly. This is the main reason behind the price boom. According to Otthontérkép, which is a collection platform for properties for rent or sale, during the two year period between 2012 and 2014 the price of the real estate gone up by 36% on average. The increase in District VII. was more noteworthy: renting an apartment there in 2014 was 52% more expensive than renting it in 2012. The core reason why properties in District VII. can produce fantastic income for real estate investors is that the ruin pubs, and nightclubs getting more and more famous amongst students all around Europe.
When the supply demand balance turn upside down, usually the prices changes radically. What changed on the demand side? Between 2001 and 2011 the population of Budapest decreased by 50.000 people. Now, it seems this trends turns backward. The last three years the number of occupants increased with 15.000.
Way below the market price?
Despite the price rise some properties of foreign investors are still rented out way below the market price.
The reason is that the owner or the property manager did not really followed the market trends.
Tower’s experience is that we can often increase the rent by 20% when we start to manage an apartment.
Even if the apartment is not in the best shape, in the city center - and in particular this time - it is easy to achieve a higher the rent.
Naturally it is worthy to spend on the property to maximize the income. A relatively small investment can cause a serious differences.
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More and more tenants decide to extend the lease
Because of the raising rental fees tenants think twice to move to another flat.
According to our experience more than the half of the tenants are extending their lease agreement despite the fact that rents are increased by 10-20% for the new period.
In case you have a tenant with an agreement which is about to expire or it was signed for an indefinite period of time, probably now is the time renegotiate the conditions.
Sometimes it might be worthy to lose the old tenant and pay the commission to the real estate agent for the new tenant because of the rate of the rental growth.
(Source: towerbudapest.com / portfolio.hu)
