GDP growth prediction for 2011 in Slovakia is estimated to be 3.6%. The real estate prices dropped by average 10-15% in Slovakia due to the world economic crisis.

As a result of the balanced economic growth in Slovakia during the boom times, there was no significant real estate bubble created which could be compared to that in Ireland or Spain. 73% of real estate transactions in the country are performed in Bratislava and surrounding localities.

80% of all mortgage contracts are realized in Bratislava.

People living in Bratislava earn 50% more than those living in the countryside by average.

The price of real estate in Bratislava is double that of the countryside.

The number of unsold newly build apartments decreased from 5,000 to 3,000 between 2009 and 2011.

Unemployment rate in Bratislava is 4%. In Slovakia it is over 10%.

Mortgage sales rose by 18% this year.

85% of the Slovak population owns property without any mortgage.

For those who are thinking to sell their Slovak property, it seems to be the right time, if they purchased before the prices went to the peak during the years 2007-2008. Investors who purchased at peak prices are advised to wait until the prices start climbing again.

Martin Melisko

www.ceinvest.sk

The CE Invest Group is to merge with Catherine Dickens Properties under the new name Central European Property Group registered in Budapest and serving both Slovakian and Hungarian markets as a leading property management and consulting firm. Combining the professional world class service culture and internationally recognized interiors of Catherine Dickens with the strengths of CE Invest in residential and commercial lettings, international networking as well as corporate and tax consulting which will provide the added value that a foreign investor is looking for in Central Europe.

We are expecting an increase in property prices, especially in Budapest, in the coming years. Today an investor can still purchase a 2-bedroom luxury apartment in a refurbished listed building with 24-hour concierge service in a prime location in the heart of Budapest for €155,000, while the same amount would merely buy a 1-bedroom unit in a new development away from the center in Bratislava. The rental income of the luxury flat in Budapest would be twice that of the 1-bed unit in Bratislava.

The new Hungarian government has introduced incentives for property buyers, has created a more attractive business environment for foreign companies and employers in general, and has taken on the EU Presidency from January 1. Recent constitutional and monetary legislation has created uncertainty in the international markets, so the outlook for the Hungarian currency is ambiguous. Therefore this is a good time to buy property, however, only in the prime areas of Budapest. For those who have purchased property it is best not to sell, but keep it under good management to maximize revenue. The companies under CE Property Group specialize in the planning and project management of the restoration, interior design, and subsequent rental of high-end properties in Budapest.

If you have a question on your property or would like to know more about the Hungarian or Slovakian market, you can ask our expert Andras here

Despite some recent website problems of late, everything is going well at CE Invest in Budapest, we are in the middle of insuring a large number of apartments under our management, there are also ongoing renovation and furnishing projects, which keep us busy. We have added 10 new apartments to management in the last two months, mostly people who came over from other property management companies. Our new colleague, Adam, helps out with the workload. Investments have not stopped, we recently sold buy-to-let residential property in the 6th district @ 1673 EUR/m2.

The economic outlook in Hungary is volatile. Everyone is concerned about the red sludge on the news, which is a major environmental catastrophe, however it does not affect property in Budapest. Perhaps the most significant event influencing the property market in Budapest were the local government elections on October 3rd. Until now the government was careful not to say or do anything which would have weakened its position for the elections, so practically nothing was done since April, when the ruling party Fidesz took office. Now the markets are expecting subsidies and incentives for construction and purchases and generally, employment. The monetary playing field for the country is limited, so much creativity is needed to stay overboard. Those who bought property in the capital cities of Central Eastern Europe are far better off than investors who were looking for a larger profit in up-and-coming areas, which have fallen back to economic stagnation.

The rental market in Budapest is booming, we are not complaining - with the right pricing, anything can be rented.

Opening of New CENTURY 21 Office in Bratislava

I am proud to announce to you that we have successfully opened the first CENTURY 21 office in Bratislava, Slovakia. The name of the brokerage is CENTURY 21 CE Development. CE Invest operates on the side as the core property management company, however all sales and rentals will take place according to the golden standard of the brand CENTURY 21. My business partner Martin Melisko, and I, have decided to purchase the license of the world's number one real estate franchise network, because we feel the next few years will be about the consolidation of the property market in Central Eastern Europe and large time-tested franchise networks will be able to spread across the landscape, bringing a higher level of professionalism to the market. Back in 2004, we were the first company to sell buy-to-let property along with a comprehensive property management package in Slovakia on the Internet. By 2009 we have established ourselves as the market-leading residential property management firm. It is good to be at the forefront of innovation and through our involvement with the National Association of Licensed Real Estate Agencies (NARKS) we hope to contribute to national standards in real estate education and professional practice in Slovakia. 

Take a look at the pictures of the event here:

Our team in Bratislava

Our agents have the privilege of taking the country's most advanced courses in ethics and property mediation services, with a special emphasis on the legal and financial implications of a property transaction in Slovakia. Thus, they are equipped to act as professional consultants when it comes to sales or rentals, with the empathy and experience of a seasoned property manager.

Andras Patkai www.ceinvest.hu

Follow me on Twitter

I have recently started a personal (actually professional) Twitter account, @andraspatkai. You are welcome to follow me, where you will receive the most recent information about what's happening in Budapest and Bratislava as regards real estate. You can expect posts of pictures, market trends, news and opportunities. Your intelligent insights are most welcome, of course!

The price of residential and commercial plots for construction fell by 10% on average compared to 2009. The most substantial fall was registered in Nitra County in the west (20%), the least in Košice County in the east (2%). Despite strong demand, prices of buildable land fell by 16% in Bratislava.

The most interesting areas for residential developments in Bratislava are Dúbravka and Nové Mesto. The price of one square meter was 500-600 EUR in these parts of Bratislava a few months ago. Nowadays, it is 15-20% cheaper.

The price of industrial land stayed approximately at the same level as in 2009. They sell in the range of 30-80 EUR per square meter all over the Slovak Republic.

Demand for commercial real estate is the strongest in Bratislava (mainly in the vicinity of the airport and Dúbravka) as well as Košice.

Colliers International expects fixed prices of property throughout 2010. The first important transactions in this segment are expected to come in the second part of the year.

Slovak banks lend more as before recession

According to the National Bank of Slovakia, the Slovak banks approved mortgages in amount of 1.54 billion EUR in the first half of 2010. This is 4% more than in the first half of 2008, still the boom period.

Commercial

Colliers International reported an increase in inquiries for commercial property this summer. Two larger transactions in the last 6 months include the purchase of the 4-star Hotel Mercur (Accor) in Bratislava, close to the Main Train Station, with 175 uniquely designed rooms, opening on September 1, 2010; and the 272-million-euro purchase of a division of Volksbank Europolis by CA Immobilien Anlagen AG, expanding its eastern Europe property holdings, in Bratislava and Chorvátsky Grob.

Slovakia Ring

Quietly, without too much fanfare a brand new 5922m race track came to life in the middle of Europe. The location is near Dunajska Streda, 50 km from Bratislava, 125 km from Vienna, and 150 km from Budapest. Although it has no ambitions to host F1 races, the top-notch facility and the diverse programs arranged around it look impressive. The official opening of the 24.9-million-euro project was April 9, 2010. This is how the official track website describes the venue:

Being a top-notch training facility for motorists, Slovakia Ring is now bringing a unique chance for you to improve your driving skills, try a fast ride, exercise your driving techniques or just enjoy the freedom of sitting behind the wheel. Motorcycle enthusiasts as well as the owners of high performance automobiles will certainly appreciate the unique space for trying the limits of their “swift horses” and an exceptional opportunity to experience the feelings of professionals who run real races. On the other hand, racing teams and agencies have been given an ideal space for conducting racing events of outstanding quality in every aspect.

There is much construction work going on around the facility, including a 84-bed 3-star hotel. The expected number of foreign tourists annually is 40,000, providing income for hundreds of local Slovaks. Such developments enhance the excellent touristic appeal of Slovakia with the Tatra Mountains, thermal baths, wine country, horse-riding, hunting excursions, and water sports.

Martin Melisko www.ceinvest.sk

Residential

There is demand for residential real estate in Slovakia; however buyers are much more cautious. The prices are lower, bringing with them lower quality, which is expected to affect new projects in the next 5-10 years. Investors concentrate on sustainability. Low quality projects on the residential market are certainly a looming concern - "This is the key factor that will affect selling in the next couple of years," explained an expert at the Real Estate and Development Conference, Bratislava on May 3, 2010.

The purchasing power of Slovaks has decreased by only a minimum - the effects of the crisis will be delayed, felt from the second half of 2010, especially in the services sector. The production industry is already going up.

At the moment there are 4000 unoccupied unsold apartments in Bratislava in new buildings. Young families are looking for discounts, good deals - 40-80 m2 apartments. In this atmosphere of oversupply, agencies do not list every apartment, only the ones that have the potential to be sold within 3 months. Around 40% of the current offers on the market are advertized for unrealistic prices, the actual sales price is usually 20% below the publicized price. It is the agents' responsibility is to inform the seller about the realistic price; if the price is right, the property will be sold within a month. If it is not sold within 3 months it is not worth investing in advertizing at the same price. Agents must be creative in using the right wording to target the proper groups and using uncharted marketing channels.

According to the real estate agency RE/MAX SLOVAKIA the sale and rent of property should increase by 15% in 2010. Prices of residential property have fallen by 10% in first quarter of 2010. According to the analyst of Postova Banka the prices of houses and apartments were the lowest in the last quarter of 2009. Prices returned back to the level of the end of the year 2007. Any increase will depend on the labor market.

Doom for the Construction Industry

It will be another two years before the apartments currently being built will be bought. The construction sector has fallen 8-12% since 2008/2009. The price of materials continues to drop, the building sector is no longer about revenue, it is merely about survival. The price of labor is going down. 2010 already brought dramatic decrease, new orders are not coming in, the only possibility is EU funds, PPP funds; this will be the year of dramatic downsizing in the building sector, with massive unemployment.

Commercial Scene

All new projects are mostly retail projects - for example Boria, Aupark in Kosice, Central (also residential) on Trnavske Square, and Trnava. Bratislava has potential for one more shopping center, namely in Twin City (see image to the left) in Mlynske Nivy, between Stare Mesto (Old Town) and Ruzinov districts, by HB Reavis, due to complete in 2014.

The ability to finance such projects depends on the segment. For example industrial real estate is problematic, banks require 80-90% down payment and only provide 10-20% LTV. In the commercial retail & office sectors the banks are more open to finance, but they reserve the right to step back from the project and withdraw financing if it is not progressing according to plan. Investors need to present 40-50% of the preliminary rental contracts just to be able to speak to a bank about possible financing.

Office & Retail

The two flagship waterfront projects of Bratislava, J&T's River Park (small images) and Ballymore's Eurovea (pictured below), both financed by CSOB Bank, have completed reasonably well. The grand opening of the 5-star Kempinski Hotel and the riverside promenade at River Park will be held in June 2010. The opening celebrations of the whole project are expected by the end of the summer, there is 85% occupancy so far, of the total area of 34,000 sq meters of retail and office space. J&T Group has 50% occupancy in the West End Square (final completion 7/2011) and 95% in Tower 115, which is located next to Ballymore's spectacular Eurovea project. Eurovea had its grand opening on April 24. 500,000 people (equal to the entire population of the capital city) visited Bratislava´s newest and most elegant shopping centre Eurovea Galleria in first two weeks since its opening. 30% of their office space and 99.75% of the retail space is occupied. Investors are looking for net effective rent, 10 EUR per sq meter is no longer interesting. Bratislava has the cheapest office space in the whole of Central Europe. The financing of office space in 2010 has also changed - 40% own finances, 40% pre-lease (compared to 2005 when the bank only required 15% own finances).

Andras Patkai ww.ceinvest.sk

As opposed to the situation in the neighboring countries, mortgage conditions have improved over the past 6 months in euro-zone Slovakia. Banks are offering government-subsidized mortgage products, preferential interest rates, discounted fees, "mortgage within 24 hours," attractive re-financing options, and gifts like an LCD TV. The result is a lively property market. 100% LTV mortgages are also back. However, financing is no longer so cheap because of the high risk margins of the banks, who can afford high risk margins because the ECB interest rates are low.

The stable economic situation of buyer results in better conditions from the bank. Existing life insurance is a key factor for interest rate subsidies, as well as education, number of children, and in some cases, whether the bank has provided financing for the development in which the applicant wishes to purchase.

Young people under the age of 35 receive a 3% interest rate subsidy if their income does not exceed 1.3 times the average wage of the national economy.

"The banking sector per se is stable," Director of Deloitte Slovensko's consulting department Ivan Luzica said, "the banks are rebounding from the crisis. They are offering new products already - financing of projects or credits," he said. Banks, he said, can afford to come up with new products and services by virtue of the fact that they resorted to hard, restrictive measures at the onset of the crisis.

Currently the financing incentives apply only to local residents. For some reason banks are reluctant to grant loans to foreign buy-to-let investors. This is apt to change this year.

Property prices are expected to increase in the next 2 quarters. Presently the prices in Bratislava stand at 2007 levels, which means approximately 1300 EUR/m2, on average, which includes many large old (difficult to sell) apartments. The average price of 1-bedroom old apartments in Bratislava has dropped from 2043 EUR/m2 in January, 2008, to 1565 EUR/m2 in March 2010. The most significant drop occurred between January 2009 and January 2010.

In case of newly-built 1-bedroom apartments the decrease from January 2009 (2253 EUR/m2) until January 2010 (2046 EUR/m2) has been over 9%. However, in March, 2010, the average price has already climbed to 2058 EUR/m2, and is rising rapidly.

Although this is less prevalent now, there can be as much as 40% difference between the advertized and the real sales price.

Generally there is an atmosphere of optimism in the country. The foreign trade balance continues to show a surplus. According to data released by the Statistics Office, Slovakia had a foreign trade surplus of over ?67 million in February 2010, the SITA newswire reported.

CE Invest continues to offer its property management, rental, and successful resale services on the residential market in Bratislava.

Andras Patkai (CE Invest)

ask our Slovakian expert a question here

On March 1 the Hungarian government has maximized the loan to value (LTV) on mortgage loans, setting a 75% limit in case of Hungarian forint (HUF) loans and 60% in case of euro loans. Swiss francs and other currency loans cannot exceed 45% of the value. These percentages apply to the value of the property as determined by the bank, so the real figures are closer to 65% and 50%, respectively. Reason: Household debt has significantly risen in Hungary over the past two years and the government wants to decrease the risk of personal bankruptcies and resulting foreclosures.

From June 11 collateral alone will not be enough; the applicant's credit record, personal financial statement, and net income will determine whether they are eligible for the loan. Most banks already operate under such conditions; the government regulation merely formalized the existing situation, preventing banks from returning to more liberal practices after the recession. On the one hand this is a guarantee for more stability and less foreclosures in the future, on the other hand there will be much fewer loan applications (last year household loans already dropped sharply to a mere 20% of the previous year's turnover), it will take longer for the economy and the property market to wake up from its long slumber. The reason net income is such a problem is the fact that much of the economy is still in the grey. Hungarians have money, but are unwilling to declare it.

Why is this important? Investors seeking to exit and resell on the local market must take into consideration the incentives offered by the government to potential buyers. It seems the situation will not improve in the near future; it will not be easier to get a mortgage loan. Therefore we suggest furnishing and improving the property to attract a stable tenant, otherwise radically reducing the price to be able to sell.

Real estate experts speak of a needed annual 40,000 new units in the country for any quality changes to appear on the residential market. There were altogether 32,000 units completed in 2009. Projections for 2010 point to merely 19,000 units, which would be a 50-year-low. Since 1991, 2009 was the first year when the number of units handed over exceeded the number of units planned. In order to boost the economy, the real estate industry is anticipating government-subsidized loans from the new administration when it launches its program this summer after the elections, but nobody has suggested a source for this budget yet.    

Some good news: Government has also maximized the penalty payable when repaying the principal before the term of the loan expires; it cannot exceed 2% of the repaid amount. This only applies to loans taken after March 1, 2010. Why is this important? The penalty for early-repayment used to be higher. Investors can now save on costs when selling property in Hungary. This, coupled with the reduced stamp duty and less capital gains tax, should make it easier to resell on the Hungarian market. All we need is financing for the buyers, unfortunately this is exactly what has been obstructed by the government. Government-subsidized loans have been stopped in July, 2009.

In Slovakia the situation is quite the opposite. The government is encouraging young couples to buy apartments by introducing government-subsidized loans where people pay as little as 2% interest on long-term loans on condition they do not resell within 4 years. However, these options are only available for local residents.

Property Audit Service

Service for Apartment Owners in Budapest and Bratislava

A thorough assessment of your apartment

Get the full status reports from an independent third party professional regarding your...

• Lease

• Utility contracts

• Tax situation

• Outlook for the future & possible exit strategies

Included are suggestions regarding insurance and where we think you can save costs.

No obligation to use our services afterwards, this is an independent expert opinion, so you are not limited to a single expert's opinion.

Fee: 300 EUR + VAT/property

Ivory Tower

Unique corner apartment for sale on the top floor of a magnificent turn-of-the-century building in central Budapest

• Built in 1913

• Beautiful view, Budapest District 7

• 79 m2

• 6th floor with lift

• Area currently being turned into a pedestrian zone

• Parking garages available nearby

• Business district

• Rental potential: €550-600 depending on furnishing quality

• Needs renovation - plans in place to turn it into an exclusive loft apartment with 2 rooms

• Price: €82,500 (65% LTV financing available)

Andras Patkai

info@ceinvest.hu

To request further details on anything you have seen on our newsletter click here or call +36 1 878 1320.

On March 1 the Hungarian government has maximized the loan to value (LTV) on mortgage loans, setting a 75% limit in case of Hungarian forint (HUF) loans and 60% in case of euro loans. Swiss francs and other currency loans cannot exceed 45% of the value. There percentages apply to the value of the property as determined by the bank, so the real figures are closer to 65% and 50%, respectively. Reason: Household debt has significantly risen in Hungary over the past two years and the government wants to decrease the risk of personal bankruptcies and resulting foreclosures.

From June 11 collateral alone will not be enough; the applicant’s credit record, personal financial statement, and net income will determine whether they are eligible for the loan. Most banks already operate under such conditions; the government regulation merely formalized the existing situation, preventing banks from returning to more liberal practices after the recession. On the one hand this is a guarantee for more stability and less foreclosures in the future, on the other hand there will be much fewer loan applications, it will take longer for the economy and the property market to wake up from its long slumber. The reason net income is such a problem is the fact that much of the economy is still in the grey. Hungarians have money, but are unwilling to declare it.

Why is this important? Investors seeking to exit and resell on the local market must take into consideration the incentives offered by the government to potential buyers. It seems the situation will not improve in the near future; it will not be easier to get a mortgage loan. Therefore we suggest furnishing and improving the property to attract a stable tenant, otherwise radically reducing the price to be able to sell.

Real estate experts speak of a needed annual 40,000 new units in the country for any quality changes to appear on the residential market. There were altogether 32,000 units completed in 2009. Projections for 2010 point to merely 19,000 units, which would be a 50-year-low. Since 1991, 2009 was the first year when the number of units handed over exceeded the number of units planned. In order to boost the economy, the real estate industry is anticipating government-subsidized loans from the new administration when it launches its program this summer after the elections, but nobody has suggested a source for this budget yet.

Some good news: Government has also maximized the penalty payable when repaying the principal before the term of the loan expires; it cannot exceed 2% of the repaid amount. This only applies to loans taken after March 1, 2010. Why is this important? The penalty used to be higher. Investors can now save on costs when selling property in Hungary. This, coupled with the reduced stamp duty and less capital gains tax, should make it easier to resell on the Hungarian market. All we need is financing for the buyers, unfortunately this is exactly what has been obstructed by the government.

In Slovakia the situation is quite the opposite. The government is encouraging young couples to buy apartments by introducing government-subsidized loans where people pay as little as 2% interest on long-term loans on condition they do not resell within 4 years. However, these options are only available for local residents.

For those who sign up through Property Secrets, we offer a 50% discount on Property Management Services in Hungary, for a year. This means we will manage their apartment for 5% of the monthly rent + VAT instead of 10%, for a year. No strings attached, no obligation to remain with our company if not satisfied.

This is a way for apartment owners to further cut costs in Hungary and we will add value to their investment by providing professional advice on furnishing, rental, financing, resale, and taxation.

For those who do not wish to transfer the management to our company, we offer a Property Audit Service, which means for a fee of 300 EUR + VAT we make a thorough assessment of your apartment, get the full status reports as an independent third party regarding your lease, utility contracts, tax situation, and outlook for the future – possible exit strategies. We will include suggestions regarding insurance and where we think you can save costs. No obligation to use our services afterwards, this is an independent expert opinion, so you are not limited to your existing property manager’s opinion.

Andras Patkai andras@ceinvest.hu

Although income tax is 19% in Slovakia, the  available incentives are so large, that an average apartment owner ends up with paying less than 2% tax on gross rental income. Here is how.

The deadline for submitting the 2009 Tax Return in the Slovak Republic is March 31, 2010. This applies to individuals who own property in Slovakia and receive an income from the rent.

Where should I pay this tax?

This has already been decided. It must be paid in Slovakia.

Double Taxation Treaties are conventions between two countries that aim to eliminate the double taxation of income or gains arising in one territory and paid to residents of another territory. They work by dividing the tax rights each country claims by its domestic laws over the same income and gains. Slovakia signed a Double Taxation Agreement with the United Kingdom, for example, on November 5, 1990, which came into force on December 20, 1991, and was published under Law 89/1992. The document may be downloaded here (HM Revenue & Customs). The same agreement between Ireland and Slovakia can be found here (Revenue, Irish Tax & Customs). The updated list of countries may be downloaded from the web site of the Slovak Ministry of Finance here. Since these agreements between countries follow an international standard, they are very similar. Article 6 of the Agreement discusses "Income from immovable property." It provides for each government to levy income tax in the country where the real estate is located: "Income from immovable property may be taxed in the Contracting State in which such property is situated." The tax paid in Slovakia can be deducted from the tax base in the country of residence.

What if I have already paid tax on my 2009 worldwide income in my home country?

Strictly, you should have first completed tax returns and paid any tax in Slovakia. Then when you completed your tax returns in your home country, you would have been given credit for the tax you paid in Slovakia, against your domestic tax liabilities. However, in the case you have completed your tax returns in your country, and have paid tax on the rental profit but have not had credit for any Slovak tax, you now need to complete a tax return in Slovakia and pay any tax in Slovakia. Once you have done so, you will need to obtain credit for the Slovak tax against the domestic tax you have paid.

Those apartment owners who have not yet registered the income-producing activity of rental with the Slovak Tax Authority, are strongly encouraged to do so. Otherwise they risk serious penalties for years to come. If no tax has been paid on rental income in Slovakia so far, as far as the Tax Authority is concerned, the apartment has not been rented. In many cases this situation cannot continue, especially if there are regular bank transfers to investor's account from the property management company, which indicate commercial activity. This proves the apartment owner has regular income in the country.

There are significant tax incentives available for individuals who provide housing in Slovakia:

1.Deductable amount for rental activity (odpočítateľná položka): currently 830 euros

2.Across-the-board tax cut (paušálne výdavky): currently 40%

3.Deductable amount for the tax payer (odpočítateľná položka pre daňovníka): currently 4025.70 euros

Net rent and utilities (energies, as they are called in Slovakia) are always combined to form the total rental income of an apartment.

Therefore, if an apartment is rented for say 600 euros/month and energy and common costs are 150 euros/month, the total annual income is (600 + 150) x 12 = 9000 euros. 830 euros may be deducted from this gross sum, which gives us 8170 euros. The 40% tax cut further reduces our tax base to 4902 euros. subtract the fixed amount of 4025.70 euros from this to get the final annual tax base of 876.30 euros. Income tax is taxed at 19%, so we pay 166.50 euros tax. This comes out to 1.85% of the gross income of the apartment.

The above calculation indicates that it is possible to arrive at a zero figure for tax in a given year. In this case a Tax Return still has to be submitted.

CE Invest will prepare and submit the tax return for you, issue rental invoices, and do the accounting for an annual fee. It is also possible to perform a mock tax audit and calculate unpaid tax in retrospect.

Companies are taxed at 19% corporate tax on profits. There is no income tax to be paid on dividends in Slovakia, however such income must be declared in the country of residence, after which income tax is due.

CE Invest is the #1 Rental Agency of Gozsdu Court in Budapest, Hungary

Apartments for Sale in this Exclusive Location

Rented Apartment in Gozsdu Udvar

Price: €110,000
1 bedroom
Facing inner court
1st Floor
Size: 45 m2
Price includes underground garage space
Price includes furniture

Rented for 500 EUR/month until 31st January 2011
Rental potential: €500-550

Duplex Apartment in Gozsdu Udvar, Budapest, for Sale

Price: €140,000
Bedrooms: 1 bedroom + loft (duplex apartment)
Facing inner court
4th floor/attic
Rental potential: €550-600 depending on furnishing quality
Size: 77 m2 registered (73.5 m2 full ceiling height 1.9m)

BUILDING

Gozsdu Court is truly one of the most impressive new developments at present in central Budapest. A monumental classical renovation, Gozsdu has become not only one of the city’s premier residences, but also a key cultural centre in Budapest. The prestigious building, and first class facilities including the stunning Holmes Place gym combined with the central location offer the best in city centre living.

LOCATION

Located between Kiraly utca and Dob utca, Gozsdu Court, a secure gated development, is located in what has become one of the most sought after and fashionable areas in Budapest. The street Kiraly utca has undergone significant development over the last few years and is now home to various cafés and terraces, museums, art galleries, exhibitions and more. The galleries of Gozsdu Court itself are also drawing attention including the White Label gallery. Also close by are all the amenities of Andrassy Avenue, and the Deak Ferenc and Varosmarty Squares.

SERVICES

Gozsdu Court benefits from on-site concierge services and 24-hour security. Residents at Gozsdu can apply for membership at without a doubt Hungary’s most impressive new fitness gym. A spectacular world-class club, Holmes Place, frequented by foreigners, is a 2000 sqm wellness centre, and features the best in modern facilities. Several fitness and conditioning halls as well as various saunas, a steam room and a swimming pool are also located at Gozsdu Court.

Andras Patkai www.ceinvest.hu

Reduced Stamp Duty in Hungary

The purchase tax (stamp duty) payable after acquiring property in Hungary has been reduced by roughly 2%, effective January 1, 2010. 2% is due for the first 4 million HUF (14,800 EUR) of the purchase price, which is 80,000 HUF (296 EUR), then a further 4% for the remaining amount. Until now buyers had to pay 6% on the remaining amount. So in case of an apartment worth 15 million HUF (55,555 EUR), the tax is 296 EUR + 4% of the remaining 40,000 EUR, which is 1630 EUR, altogether 1926 EUR. In case of an apartment which cost 75,000 EUR, the tax is 2700 EUR. A 100,000 EUR apartment would require 3800 EUR in taxes, and a 150,000 EUR apartment would mean 5700 EUR in taxes. Previously it would have been 8400 EUR in case of the latter.

In case of new-built property bought as a first user directly from the builder, no purchase tax has to be paid for the first 15 million HUF (55,555 EUR), and only 4% is due for the remainder of the purchase price up to 30 million HUF (111,111 EUR). Until the end of 2009 the stamp duty on holiday homes, garage space, and storage rooms in Hungary used to be 10%. This has also been reduced to 4% as of January 1.

In case of plots for development, the previous 10% tax has also been reduced to 4%. If the buyer intends to build residential property on the plot within 4 years, the payment of the stamp duty may be delayed. Once the usage permit of the new building is presented to the tax authority, the stamp duty is canceled. Otherwise it must be paid with interest.

Until now it was easy to avoid paying stamp duty when buying property in case the property was owned by a company and the buyer merely bought the shares. Now, if more than 75% of the assets of a project company are real estate, the buyer of the shares is liable to pay the relevant stamp duty. When the transaction value is over 1 billion HUF (3.7 million EUR), the stamp duty is reduced from 4% to 2%, and may not exceed 200 million HUF (740,740 EUR) for each property involved

2010 is an election year both in Hungary and Slovakia, with parliamentary elections due April 11 in Hungary and June 12 in Slovakia. Both elections are followed by elections in the local governments (October and November, respectively), which determine local property tax. This means taxation issues will be a campaign issue in both countries and may change as the new governments begin looking for income, so look out for changes regarding property and rental income.

In Slovakia currently there is no stamp duty on purchased property.

“Central and eastern European markets have been the strongest performers in the world in the past six months, in a sharp turnaround of fortunes as the concerns of investors have switched to the mounting debts in the developed world.” January 31 2010 – Financial Times

Andras Patkai (CE Invest). www.ceinvest.hu

January 27, 2010

Slovakia – Locals Buying

CE Invest is successfully selling the apartments of foreign investors to the local market in Bratislava. The demand for quality housing in the capital city has not abated and now that the prices have come down a little (20%), Slovaks have decided to buy. This phenomenon can only be observed in the segment of the residential market which has always been most attractive to buy-to-let investors, namely city-center, preferably newly-built, attractive 1-2-bedroom units.

What drives the market?

As opposed to Prague and Budapest, there is such a drastic relative scarcity of new stylish apartments in the city that as soon as one crosses the imaginary affordability threshold, people rush to buy. What may not seem so apparent from Western Europe, the contrast between old “Communist” housing and new developments built between 2004-2008 is tremendous. We are not only talking about grey pre-fab blocks of flats; the average apartments in the city, advertised as “brick buildings,” whether pre- or post-war, are avoided by new buyers. The main issues are the “old feel;” poor infrastructure; poorly lit, cold, ghastly stairwells and corridors full of the neighbor’s flower pots, laundry, and household junk; aggravated by the inefficient heating methods, leaking roofs, and aging plumbing and electric systems, which fuel constant debate among the tenants of the building. New buyers are not looking for old units and existing owners are looking for ways to sell at a reasonable price, and move out.

What is more, because of the recession, practically all new construction has stopped, so the supply is limited. The significant demand for new-built apartments has not disappeared in the wake of the credit crunch, for it was driven by a healthy economic need in this post-Communist Central European country. The boom until 2008 has certainly brought unrealistic expectations, so prices are still high, it takes a while for owners to settle for a lower price and now, seeing the increasing demand, those who can afford it, have decided to wait.

Credit is readily available in Slovakia for local residents. The banks provide mortgage loans with the same conditions as before the credit crunch. The only change is that credit is not available (yet) to non-residents. It is possible to obtain a loan with 4.3% interest while the rental yield on the apartment is 6%. There is practically no unemployment in Bratislava, as opposed to the eastern part of the country where the gap between rich and poor is widening. On top of the favorable credit situation, many Slovaks have saved up sizeable amounts of cash. Therefore all the circumstances are ripe for a steady rise in property transactions and prices in 2010.

Examples of what is for sale in Bratislava

Three Towers Development, Bratislava

Stunning views from the landmark buildings of Three Towers, proudly rising over Bratislava. The amazing stylish feel of this apartment for sale, the many sports facilities next door, attract the corporate community from the nearby office buildings and shopping-entertainment mall.

Total area: 49m2 (1-bedroom)
Balcony: 5m2
Floor: 9
East orientation

Price: 135,000 Euros with indoor parking
Furniture: 10,480 Euros (optional)

Realistic rent: 600 Euros net

Kitchen in the Three Towers Apartment Block

Fully-furnished apartment for sale in the unique Three Towers development. Spacious bright living room, quality finish, very elegantly and practically furnished.

Total area: 58,4 m2 (1-bedroom)
Balcony: 4,85 m2
Floor: 11
East orientation

Price: 143,000 Euros with indoor parking

Realistic rent: 600 Euros net

Hungary – Booming Rental Market

The recession has brought some noteworthy changes to the Hungarian buy-to-let market. First of all, because of the halt on loans and troubles back home, foreign investors have disappeared from the residential market in Budapest. Construction all over the country has stopped, creating much unemployment and bankruptcy as the wave moved down the line of subcontractors. Because of the large supply of centrally-located renovated apartments as well as new-built units, the market is beginning to move more slowly, but CE Invest has already registered a steady increase in transactions and prices as the new year started.

Since loan conditions remained strict and credit is expensive, while prices did not come down much, the average Hungarian home owner finds it more difficult to find a good deal. Therefore the rental market is booming in Budapest. Rising unemployment in the country brought all the more opportunities to the capital city (30% of the population lives in and around Budapest), so people are looking for accommodation. The limited space of the inner city districts and the lack of new developments keep prices reasonably high. It is extremely rare to find quality new-built housing with underground parking and Western European amenities in the centre.

The city employees and many foreign companies in the metropolis do not feel the “crisis” at all. The restaurants and shopping malls are crowded; the streets are swarming with tourists; there are no more fears of a currency crisis; the new government seems to have created some economic balance (the base interest rate is down to 6%); and the country is preparing for parliamentary elections due April 11. Hungarians hear stories of the effects of the recession in Britain and Ireland and they cannot believe it. There were no foreign guest workers in Hungary, there was no over-valuation of property, a much smaller percentage of the population was indebted, and credit was never as cheap as in Western Europe. Although there are a few peripheral new developments where a number of flats could not be sold, or cannot be rented; there are no empty ghost streets or ghost districts built on speculation.

CE Invest has successfully rented apartments and residential villas over the past months to the diplomat community, corporate circles, foreign students, Hungarian businessmen, and higher-income families in the city centre. The main reason for the success is intensive networking. The property management company has also doubled its portfolio in recent months by taking over the management from individual managers, lawyers, and competing management firms. Apartment owners find the results of a swift and straightforward rental process compelling. There is nothing like a regular, transparent, computerized financial report system, which gives full control to the property investor.

What is for sale in Budapest

Pleasant, quiet, already rented 2-bedroom apartment for sale in the popular Istvan Park new development in central Budapest. Furnished with style, next to a major public transport hub, sports facilities, and every city-amenity imaginable. Underground parking included.

Floor: 1
Total floor area: 59.16 m2
Balcony: 3.92 m2
Aspect: NW

Price: 85,000 EUR
Current rental fee: net 445 EUR/month
Rental yield: 6.28% p.a.

Amenities: 24-hour security.

For general enquiries on Slovakian or Hungarian properties click here to ask our experts or see the following contacts:

HUNGARY - Richard Vigh, richard@ceinvest.hu +36 30 449 1591

SLOVAKIA - Michaela Erdelyi, michaela@ceinvest.sk +421 911 251 030

Regards

Andras Patkai

ask our expert, Andras a question here

Generally the year 2009 has been a bleak year for buy-to-let investors worldwide. The crisis came with a delay to Eastern Europe where sellers and developers refused to believe the gloomy predictions until there were obvious signs. Individual buyers, mainly from the UK, and foreign investment funds, which flooded the region until late 2008, suddenly disappeared. Banks toughened their lending criteria, unemployment rose, and the property boom came to an abrupt halt. What used to be a gold mine of opportunities and relentless optimism, gave way to a desperate scene where many property agents and developers were forced out of business.

The main issues for investors throughout the year were finding the right exit strategy with the least possible loss, and negotiating favorable property management options in the aftermath, for those who could not or would not sell.

In spite of the bad news and the market slow-down, prices merely stagnated and did not come down as much as expected. There were no massive foreclosures or easy lucrative opportunities. Investors hoping to buy 40-50% below market value were surprised to find tough resistance from unbroken sellers.

Slovakia

CE Invest, as the leading property management company of Bratislava, provides up-to-date data about the prices in the city. The rental market is strong in Bratislava. Apartments are rented within a week or two. The reason for the demand is the low supply of newly-built apartments in the city. A central location is also a much-sought-after deal for the tenants, 50% of whom are locals, the other 50% foreign businessmen, diplomats, and students.

Rental prices of newly-built units in Bratislava

Rental prices of Old Town apartments in Bratislava

Utilities are paid by the tenant. Note that in case of a vacancy, it is not only the missing rent, but the mounting utility expenses, namely building common costs, which take their toll on the investors.

Mortgage Information

Currently only two Slovak banks, OTP Bank and VUB Bank, the latter only in exceptional cases, provide mortgage loans for non-residents in the range of 50-70% loan to value (LTV). The current interest rate varies between 5.2 and 5.6%. The administrative period is around one month until the mortgage is released.

Some recent examples from the re-sale market of newly-built properties:

1-bedroom 59m2 apartment in the 3 Towers development bought by an Austrian citizen working in Bratislava for 152,000 Euros, including parking space.

1-bedroom apartment in the development Jegeho Alej by Finep was bought by a Slovak bank employee for 110,000 Euros, including parking space.

Re-sale Prices of Newly-Built Properties in Bratislava

No VAT is involved when apartments are re-sold by private persons. Costs involved in apartment re-sale for the owner include a brokerage commission of 3.5% + VAT as well as legal fees at 0.5% + VAT. Regarding 19% capital gains tax, which is to be paid on the difference between the current sales price and the original purchase price, there is a tax exemption after 5 years in case the foreign owner is registered in the apartment as his/her “place of residence.” Expenses of renovation, furniture, legal & agency fees as well as a standard 4025.70 Euro tax deduction, can be offset against the tax base.

For those who do not wish to or cannot sell, the fee for property management is 10% of the monthly rental income + VAT. An additional tenant-finding fee of one month's rent + VAT is charged upon finding a new tenant. Costs of complete furnishing including full kitchen with appliances, delivery, assembly, installation, and VAT, are as follows.

Hungary

According to a market study and predictions for 2010, by HVB Bank, yields on the property market are approaching the 6% average of Western Europe and residential prices will not rise faster than inflation.

The investment environment is somewhat blurred, which means it holds opportunities not present in the “stable” and more organized West.

Ambiguity factors include the small size and immaturity of the market, its undeveloped cyclic nature, uncertain liquidity, and the often short-sightedness of the market players. According to the HVB Bank study, there is a chaotic market with a lack of market standards or voluntary law-abiding behavior, a slow legal system, government overspending, and currency risk.

In 2009 the amount of transactions on the residential market fell back to 2004-2005 levels, around 10,000 units annually in Budapest. This is expected to rise to 12,000 in 2010. In 2009 there were 3300 newly-completed unsold units in the city of 2 million. Previously sold apartments re-enter the market as investors rather lose their deposits than complete on the sale. Effective rise in prices is only anticipated in luxury inner-city apartments and newly-built projects in the popular residential neighborhoods close to the center, where low supply will drive prices further up.

The lowering of the base interest rate of the Hungarian forint, currently at 6.5% (down from 11.5% since Oct 2008), and competition between the banks will reduce the burdens on home mortgages. Buyers are reluctant to buy off-plan, they are looking for already completed units. Experts do not expect further price drops. Property professionals expect modest interest from foreign buyers in 2010 and much improvement by 2011, primarily from British, Spanish, as well as Irish investors.

Instead of looking for bargain foreclosures, investors are encouraged to consider the commercial market for opportunities. Most of the foreclosed property is large, often incomplete family houses outside the capital.  On the other hand there are rented inner-city retail units for sale and yielding commercial buildings with yields well over 10% p.a. in Budapest.

Those who own property should not seek to sell at this time, instead minimize expenses of property management and keep a close eye on the market for exploitable leverage.

Andras Patkai (CE Invest - Bratislava)
Martin Melisko (CE Invest - Budapest)