Interview: How the Long Term Property Rental Market Changed in Budapest


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We asked Zsolt Pavelka, Lettings Manager at Tower International, about current trends in the Budapest real estate market.


Rental high season is around the corner. How did the market change compared to last year?

In the past few years, the rental high season is starting earlier every year. The big wave of Hungarian and foreign students looking for downtown apartments has already arrived. In 2016 we had such clients from June, but this year we have already received dozens of enquiries in May from students looking for accommodation from August-September. Many of these tenants are coming to Budapest already in June to ensure that they will have a home in Budapest from the start of the autumn school semester. This is an important indicator of the lack of supply in the long term rental market in this important period of the year.

What are your long term expectations concerning rental fees in Budapest?

Because of the increasing demand, as summer arrives, there is always a slight growth in long term rental fees. However, during the last couple of years, a lot of new properties were bought by investors and now these apartments are also listed as long term rental flats. Because of this new supply and because of the relative calming down of the property market I expect rental fees to stagnate. At the same time rental fees began to vary more by location. For example, downtown districts and the renewed part of district 9 are still in a slight growth. Meanwhile, in other locations like the outer parts of district 6 and 7, there is a slight decrease in rental fees.

What is the most common reason that property owners have to compromise on rental fees?

The condition of the apartment and the furniture. Unfortunately there are still many low-quality flats on the market, under the average which tenants expect.

Newly built properties bought before the crisis are now in need of renovation. Many property owners have not upgraded, revamped their flats in the past 10-12 years. The floor is scratched, furniture and kitchen are worn, etc. These important factors greatly influence the potential maximum rental fee. In my experience, the money you have to invest into a quick face-lift comes back in 1-2 years and on the long term you can reach a higher profit on your investment.

At the same time, many new investors to the market have nicely renovated properties. Obviously the now run-down apartments are even less attractive compared to these new, attractive listings.

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Where are the foreign tenants coming from?

It depends on the particular period of the year. A lot of expats are coming from Asia, mainly from India and China. However, the majority of the tenants are still coming from EU member states. This year, in addition to the EU countries, foreign students are also coming from the Middle East. The wave of students from South-America - which was significant in the past few years - cannot be seen now.

 

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