Budapest property dilemma - To sell or not to sell
General phenomenon that foreigners sell rather than buy in Budapest.
To sell, or not to sell: that is the question.
13 December 2011
To sell because rent is low and does not cover its costs (monthly mortgage repayment). The bottom line is that modest designed or ugly apartments in poor condition of classic building and will hardly and slowly find suitable tenants at reasonable level of achiveable rent.
To sell also because of hidden problems of particularly new condominium in many cases. Example of Gozsdu Udvar with its 7 classics blocks had shown us what happened when gas off 2 times for circa 9 months in the last one and a half year. Gas off for half year in 2010 and (April-October) and more than 2 and a half months 2011 (August-October). This is a sort of problem that makes investors worried and driven them to get rid of Budapest rather sooner than later. Besides risky condominiums, expensive complex can encourage home owners to sell property at any price without further delay and additional risk. The expensive homes do not cause headache to investors, but tenants do not like to rent them either. Utility rule says that utility must be lower than 30% of the rent. If the ratio is higher - utility is expensive - tenants will stay out of these properties. Higher utility bills do lead to lower achievable rental rates. But potential buyers might feel threatened from expensive homes too. As a result of fears, properties with handicap might be devalued in near future.
Home owners also want to sell they are afraid of standstill Hungarian economy and potential fear of property devaluation in Budapest. Therefore, for example, foreigners have run out of buy-to-let property concept since fall of 2008 when global financial crisis has started. In today's environment, where eurozone crisis raises several rational as well as irrational questions, Hungarian economic situation should not justify Budapest real estate market prices. In fact, the real estate market, which is actually out of eurozone, is not as concerned as Irish property market, for instance, where Irish economy became weak and was fallen dramatically in recent years. If, for example, collapse of eurozone - it is not unbelieveable - kick the weakest links out of eurozone (PIGS countries), housing market in these countries would suffer considerable depreciation. The eurozone is undeniably in crisis. Even Budapest property, therefore, can mean more financial security in contrast to Irish one in those days. Hungarian forint would remain national currency in Hungary whether eurozone is broken-up or not in the next decade. But what happens to Ireland and what currency they will use or how much it is worth if they had to leave eurozone!
Customers with mouse mentality wanted
So it is not as surprising at all that property seminars were held - after long break - in Ireland this autumn again, where kind and helpful Hungarian companies were hunting puzzled and must-sell home owners with budapest property. In general, must-buy British, Russian and Hungarian investors are behind the companies that try to sell sweet dreams. They are looking for squeaky mouse customers who are trembling but they have good apartments in Budapest. Good apartments for sell are fairly limited, of course, but desprate Irish people do appreciate care because it gives them hope that maybe time has come when they can pull of Budapest property market. Exit, however, is not so sweet for sellers who must accept low price if they want to sell, but it is definitely a good deal for buyers, indeed.
Today, those sell only who cannot afford to keep Budapest property. Distressed investors, who are in financial trouble and can not finance a property in Budapest, are going to get out. But it is very difficult to find a good quality residential property investment in Budapest today. The majority of home owners whose situation has become impossible, has apartments for sale less desired by the locals.
Key rule that Budapest property market is determined by the local buyers' needs. If someone has a home for sale the locals want, he or she will sell it much easier compared to a large apartment in general condition with high utilities located inner districs of Pest like district 6 and 7.
Budapest property dilemma sensitively determines the attitude of foreign owners. There are two kinds of people in Budapest. Time is too slow for those how cannot wait and they want to escape from Budapest at any price. Some people, however, who can wait, are cool-headed. Today, selling is a "sin" and a simply synonym of loss.
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