2010 statistics by Otthon Centrum and Ingatlan.com show that the average square meter price of apartments in Budapest has dropped below the psychological 350,000 HUF (1310 EUR/m2) threshold. This means the typical price of a studio apartment is around 10 million HUF (37,425 EUR). Note this is a city average, including remote outer districts as well. The average size of the apartments for sale on the market is 67 m2. Therefore the standard apartment sells for 85-90,000 EUR in the Hungarian capital.

The difference between the actual sales price and the advertized value can be 10-15%, which leaves room for negotiation.

Roughly 1600 new-built apartments were sold in Budapest in 2009. The number has not been so low for decades. The number of unsold apartments in projects which have already been handed over reached a record 3000, climbing to ca. 3800 at the beginning of 2010. Add to this around 3000 more apartments in projects in their final stage of construction, so -- good news for new buyers! -- there are roughly 7000 apartments to choose from in 2010.

Developer Financing

So 2010 would be the year to buy because of the large supply, lower purchase tax, and developers' special offers. Tricks developers used until now (half-priced garage, kitchen furniture thrown in, LCD TV included) are not doing the job; the key issue is financing. We see offers where a 15-20% down payment and the signing of a preliminary contract are enough for the buyer to move in. Part of the remaining purchase price is then paid in installments throughout the next year or two, making sure the monthly payments correspond to the payments of a theoretic bank loan. After this period buyer has an option to sign the final purchase contract and pay the full outstanding amount. Depending on the developer, part or much of the monthly payments may be offset from the purchase price. Should buyer fail to come up with the necessary financing, he forfeits his deposit.

Developers target the large group of would-be buyers who do not have the necessary collateral or initial capital to successfully apply for a bank mortgage. There is a striking resentment of rental, a phenomenon on the housing market in the CEE region, where Eastern Europeans would rather live under impractical crammed conditions and commute from incredibly long distances than 'throw money out the window' for rent. On average a much smaller percentage of the population rents than in Western Europe. However, the grim financial reality forces changes in large urban centers as well as remote provincial locations and the adjustment which took place decades ago in the West is slowly happening in Eastern Europe as well. Knowing this, developers offer the following crucial advantages for buyers:

• 1-2 years delay in having to obtain a mortgage, when loan conditions will most probably be better

• pay the stamp duty only after you sign the final purchase contract

• secure property at a low 2010 price level

• part of the monthly payments may be offset from the purchase price

• gain time to save for a larger required down payment for a future loan

• gain time to sell your existing apartment to free up some capital

Actively Combat Vacancy

CE Invest is currently involved in a number of projects where maintenance costs are reduced and the overall rentability of an apartment is improved. For example in one apartment we are about to replace the outdated heating system to cut monthly heating costs by 75%, thus making it more attractive to tenants and more efficient for the owner in the long run. In another apartment double-glazing windows are installed for perfect sound insulation on a busy street. We install functional kitchens and reception-room furniture in apartments which may be rented as office space later, so the first impression of a potential tenant is favorable.

Is there anything we can do for you in order to rent your apartment?

Find Me a Solution

We at CE Invest are presently securing financing for corporate clients who want to use their existing real estate as collateral and make further leveraged investments. We are also working on joining two smaller penthouse apartments to provide a solution for an investor who wishes to purchase a large luxury apartment in a central location. In another instance we are exploring the possibility of developing several luxury apartments in the attic space connected to one of our apartments for sale.

Is there anything we can do for you in order to realize your investment plan?

Andras Patkai (CE Invest)

www.ceinvest.hu

info@ceinvest.hu