I'm continuing my hunt for cities with the potential to deliver 200% growth in the next 5 years.
Yesterday, I covered the political challenge to make Budapest and Hungary a great property investment location. And as Robin Bowman added yesterday, the jury is still out on Hungary's economic improvements.
Today, asking the question - will any other cities in Hungary make make attractive property investment opportunities?
Hungary offers a logistical centre inside the EU and at the heart of Europe (Old and New).
It has higher costs than neighbours (and much higher / unreformed taxes) but offers better productivity.
It is Hungary's logistical advantage that has led to Asian electronics companies to base factories in this country. Essentially, many electronics products are 'big boxes'. This means that as the price of the product (toasters to TVs) falls, the distribution cost becomes a larger % of the overall cost. Hence, the best place to put your TV manufacturing plant - all things being equal - is in the best distribution point.
The country can be divided into 4 main parts
Budapest - the capital
The Danube Bend - West and North West of Budapest - hills of Buda and the way to Vienna. Following the Danube river (northern border with Slovakia). This region forms part of the car cluster - that includes Slovakia and Trnava.
East and South East of Budapest - the great planes - predominantly agriculture and the poorest region.
North (and North East) - hills and mountains to Slovakia and the old mining and industrial heart (with highest unemployment).
Population Distribution
One major capital city - with 2m inhabitants and 5 regional city centres - with around 300,000 inhabitants each.
10m in Hungary2m in Budapest2m in 2nd tier cities (below)6m in towns and villages
There is no clear second city (which makes investment outside Budapest trickier).
Communications
Roads are an urgent priorityRail network with large - but needs substantial upgrading.
The Danube provides an addition method of low cost water transport for containers and large items (such as rolled steel). This connects to Vienna and Bratislava to the north and has the potential to connect to Belgrade in the south (not currently navigable for large ships).
Traffic can continue on the Danube into Germany and as far as Amsterdam - although I don't know if large ships are able to navigate that far?
Budapest
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- M0 - ring road motorway around south and east side of city
- Redevelopment of Budapest container terminal
- Redevelopment of Pest city centre - Champs Elyses of Budapest
- Plans to develop the riverside (to remove traffic) from Pest side of the river
- 30% of Hungarian labour force is in or around Budapest.
- Buda and 5th District of Pest - are the expensive districts
- 9th and 8th districts are seeing large scale development (8th district still has a very poor reputation - and is regarded as dangerous). However, where the 8th district touches the Danube river, there is/ will be riverside living developments and the new National Theatre (like London's South Bank, I guess?)
- A new bridge is being constructed in the north - between 3rd and 13th district.
- 15th and 14th are panelak districts (although 14th contains some expensive areas)
- 16th districts - contains detached houses
Gyor - 2nd tier city
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Audi engine plant - producing 1m engines per yearUniversity townNew port on the Danube creating multi-modal logistics centre
Large new steel mill (Danish) nearby will transport rolled steel via the Danube Cultural city Miskolc - 2nd tier city
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Technical university
Centre of the poorest region in Hungary Szeged - 2nd tier city
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University city
Cultural city
Debrecen - 2nd tier city
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University city
Biotech centre
Pecs - 2nd tier city
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University city
Finish aerospace investment - creating 6,000 jobs
Relatively high unemployment - previously a mining centre
Cultural capital of Europe 2010
World Heritage site
Other towns - and key recent FDI
Szentgotthard
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Opel factory
Komaron
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Nokia phone factory - largest in Europe (claim?). This has drawn labour from across the Slovak border. Note - a new Nokia factory has been announced for Cluj-Napoca in Romania (which I am visiting tomorrow).
Esztergom
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Suzuki car plant - 300,000 cars per year
Szekesfehervar
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Phillips electronics
Summary
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Budapest is the obvious place for property investment.
Looking around Hungary there is no obvious second city. Candidates for investment might be Pecs (which will be European Capital of Culture) or Gyor - with a new Danube port and proximity to Slovakia and Austria.
These would be my two candidates for 200% growth in the next five years - but perhaps we are ahead of ourselves by one to three years?
If I had to choose one city, it would probably be Gyor as having the greatest potential - although I have to admit that I haven't visited this city,
Perhaps we should see if the reforms work first and Budapest takes off before we head for the second cities?
Got a view?
Cheers
Neil
ps. Tomorrow I am in Cluj-Napoca, Romania looking at the new industrial, retail investments in this city and deciding if I really believe it has the potential to grow from 400,000 (including students) to 2 million in the next 10 years! Watch this space...
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