The Budapest Rental Market

The rental situation in Budapest has changed for the worst over the past few years. It is becoming increasingly difficult to find good tenants for centrally located apartments. A recent survey shows the number of investors buying apartments in Budapest has dropped from 19% to 13% during 2004.

Studio flats start at 200 euros/month, furnished, in the southern part of the 5th district (Brody Sandor, Kalvin ter). 225 euros get you a fully equipped, unfurnished, completely renovated studio in the bank district (Bathory, Oktober 6). 245 euros is the price for a 1-bedroom small apartment in the southern parts of the 5th district (Apaczai Csere Janos, Jozsef Attila). They ask for 265-286 euros for a nicely renovated, fully equipped, furnished studio, often 1-bedroom apt, in high-income central areas (Garibaldi, Apaczai Csere Janos, Deak ter).

There are 1-2 bedroom, fully furnished and equipped (including dishwasher) apartments available in very good areas, Deak ter, Vaci utca for 300 euros. 500 euros would get you a 80-90 m2 fully furnished and equipped apartment, renovated to a high standard, in the central 5th district, for example in Aranykez or Falk Miksa streets. From this one gathers that there are varying degrees of renovation.

There are 3-4-bedroom renovated apartments on the market for 650 and 740 euros/month in the good areas of the 5th district, in nice buildings, but they are either not rented, or have some special feature - Danube panorama or antique furniture.

Agencies in Budapest are generally doing a poor job of showing apartments to potential tenants, compared to Western standards, because of the high number of viewings, valuable time, for which they are paid very little, or not at all. This is why many investment apartments are not rented out - for tenants simply find other apartments by the time the property management or rental agency shows it to them. A number of management companies are also negligent in cleaning and repairing apartments, so they are no longer acceptable in an increasingly competitive market. One must find creative ways to motivate management companies, for each day of vacancy can cause culminating damages.

Let us look at surrounding, still central districts: 6, 7, 13 (Ujlipotvaros), 9 (Raday utca area). Furnished studios in the eastern parts of the 6th, 7th districts rent for 185 euros/month, in good condition (meaning not renovated). 245 euros will get you a renovated, furnished 1-bed apartment, equipped with appliances, in the same area, where streets are dark, buildings and stairwells are gloomy, but there is excellent access to anywhere for someone who needs a city apartment. A 6th district newly-built unfurnished studio rents for 265 euros, kitchen fully equipped. For 530 euros you can get a newly-built furnished 1-bed flat with a garage and balcony in 6th district Kaldy Gyula utca. For a similar standard one has to pay only 286-367 euros in a new development, in outlying areas of the 7th district. 1-bedroom, renovated, unfurnished apartments are advertised at 285 euros in 9th district Raday utca. They are asking for 327 euros for the same when furnished. Many apartment owners are trying to attract tenants by putting in a hi-fi stereo system and video, computer, and other similar items. Raday Street has certainly become popular among young people, it is a street with a soul, the trendy cafes and shops have made it a favorite. 1-bedroom, renovated, furnished apartments in the good parts of district 13 (Hegedus Gyula, Pannonia) are rented for 265-285 euros. In Cezar Haz, one of the new developments in the 13th district, a 1-bedroom brand new apartment with a large balcony and appliances rents for 450 euros/month.

This analysis shows us that there is hardly any difference between the 5th district and surrounding districts. If you can buy an apartment cheaper in the 6th, 7th districts, you will definitely get a higher yield. Capital appreciation is also destined to be slightly greater in the outer districts, for they will catch up with the 5th district. This does not apply to high-spec, elegant apartments, which are found only in the 5th district, along the Danube, and around the Parliament building, in the bank district, where rents are between 1000-1600 euros/month for large, beautifully renovated and fully equipped apartments with some special feature. Another significant phenomenon is the higher demand for central newly-built housing. Tenants will pay a much higher rent for a newer, more Western atmosphere, especially if garage space is included.

As the market matures, certain special locations and types of property will yield the best returns, while general centrally located mid-category apartments will continue to lose appeal for investors.

Written by Andras Patkai from BlavaBlava.com. You can sign up to Andras' Budapest newsletters here