Real Estate Investment in Hungary
A third-country national may stay in Hungary for investment purposes as a guest investor for an extended period. The guest investor residence permit can be apostrophized as the golden visa, which is common in international parlance, although the legislation does not use this term.
A third-country national whose stay is of national economic interest can obtain a guest investor visa. The acquisition of a residential property located in Hungary with a value of at least EUR 500,000 is considered to be of national economic interest.
Buying and selling real estate is done differently in every country, so in the summary below we will cover what a guest investor should pay attention to when buying a residential property in Hungary, and at the same time we will go through the investment process. Learn more about real estate investment in Hungary!
Table of contents:
- Real estate investment in Hungary for guest investors
- Making an offer
- Conclusion of the contract
- Licensing at the government office
- Land Registry procedure
- Entry phase
- Taxation on real estate investment in Hungary
- Frequently asked questions and answers
Real estate investment in Hungary for guest investors
1. Making an offer
At the end of the negotiation, the buyer can make an offer for the property, which the seller must accept. After the parties have agreed on the purchase price, the buyer can give an advance or deposit as a sign of commitment. Typically, these options arise when the purchase price will not be paid in one lump sum.
The essence of the deposit is that the seller does not sell the property to anyone else. There is no requirement, but typically 10% of the purchase price is the amount of the deposit. If the transaction fails because of the buyer, the buyer loses the deposit. If the sale does not take place because of the seller, they must repay double the amount of the deposit.
Unlike a deposit, an advance does not constitute a security. In the case of the advance payment, an important rule is that if the contract is not concluded between the parties for some reason, the given advance payment will be refunded. The down payment is included in the purchase price and can be handed over to the seller at any time. The amount of the purchase price advance is not limited compared to the purchase price, i.e. it can be any amount. The deposit and the down payment are included in the purchase price.
2. Conclusion of the contract
The closing of the purchase process is the signing of the contract, which requires the involvement of a lawyer (or notary public) due to the countersignature. The counter-signatory must represent both parties and cannot be biased towards either party.
The lawyer must obtain and check the title deed of the property to make sure that the property is in all respects what the seller claimed it to be. In Hungary, all real estate is listed in the real estate register maintained by the land office, where they are listed according to geographic number. Only the person who appears in the register in this capacity is considered the owner. The title sheet contains not only the property’s classification (e.g. residential property), but also its size, but also the owner’s main data, and the rights and obligations related to the property (e.g. mortgage).
In the case of the guest investor program, an important condition regarding the property is that it must be a residential property (commercial or industrial properties cannot be taken into account), and the property must be free of lawsuits, encumbrances, and claims.
Another requirement for the guest investor is that, upon acquiring the ownership of the residential property, a prohibition on alienation and encumbrance must be registered in the real estate register for a period of up to five years from the date of the conclusion of the sales contract. For five years, the residential property must be owned exclusively by the third-country national who submits the application for the guest investor residence permit, but it is also acceptable for the residential property to be jointly owned by one or more family members (spouse, minor children) of the third-country national.
The lawyer also checks the data of the contracting parties and must inform the parties of their contractual obligations and rights. In the contract, the seller and the buyer must be clearly identified and the name, birth name, place and time of birth, permanent address, personal identification number, and tax identification number of the contracting parties must be recorded in the contract. If either party is a legal entity, the name, registered office, company registration number, statistical number, tax number, and the name of the person acting on behalf of the company must be included in the contract. The contract must include the name of the settlement in which the property is located and the topographical number of the property. The purchase price must be fixed in the real estate purchase contract. The immigration authority can check the authenticity of the purchase price of the guest investor with the involvement of an expert. The energy certificate of the property is also mandatory for the conclusion of the contract. The date and place of the document must also be indicated.
The lawyer can only countersign a document that was signed personally unless the document was signed abroad and properly authenticated. It is possible to oblige to identify and conclude a contract without the parties appearing in person, i.e. electronically. The lawyer prepares a recording of the electronic identification and conclusion of the contract.
If the buyer pays the purchase price in one sum, the lawyer submits the contract and the permission to register the ownership right to the land registry after the conclusion of the contract. The sales contract must be submitted to the Land Registry within 30 days.
In the case of payment in installments, retention of ownership is a standard practice. When the buyer does not pay the purchase price in one sum, the application submitted to the land registry does not refer to the registration of ownership, but to the fact that the sale took place with retention of ownership. When the seller receives the full amount, they give written consent to register the title. If the seller has consented, this must be submitted to the land registry, then ownership will be registered, but at the same time, the record of the sale subject to reservation will be deleted.
3. Licensing at the government office
A foreign natural person can acquire the ownership right of real estate in Hungary with the permission of the competent government office according to the location of the real estate. Authorization is unnecessary provided the investor holds citizenship in a European Union member state, the European Economic Area, or Switzerland.
It is also possible to request a permit with a pre-contract. The application must be submitted in writing, in Hungarian, in the form of the government office. A copy of the buyer’s certified travel document, moral certificate, and title deed must be attached.
The government office will contact the municipality responsible for the location of the property and request a statement on whether the acquisition of the property harms the local government’s interest. You will also contact the immigration authorities and the police in matters of public interest (ban, entry and residence ban, arrest warrant). The administrative deadline is 45 days.
If a foreign seller sells real estate in Hungary, he does not need the permission of the government office to be able to sell the real estate.
4. Land registry procedure
The entry in the land registry can be made based on a contract countersigned by a lawyer. The buyer becomes the owner only if the ownership is registered by the land registry. Legal representation is mandatory during the procedure. After concluding the contract, the lawyer submits the necessary documents to the land registry, which has a maximum of 60 days to register the buyer’s ownership. In the case of an out-of-order procedure, the deadline for administration is a maximum of 30 days.
As mentioned above, the seller of the property must agree to the registration of the new owner. The seller will provide this when he has received the full purchase price. The buyer’s ownership is registered retroactively to the date of submission of the registration application.)
5. Entry phase
After the purchase agreement, the handover protocol is signed. In this, the parties state that the seller will hand over the property to the buyer, in which case the keys will be handed over. The readings of the consumption meters (gas, water, electricity) must be recorded. The protocol must be signed by two witnesses as a private document. The costs of the property are charged to the new owner from the date of possession. After that, we have 15 days to transfer the utility bills to our name.
Taxation on real estate investment in Hungary
In the case of the purchase of a newly built property, VAT is 5%. This reduced tax rate cannot be applied on every occasion therefore it is better to check in advance this opportunity with the real estate developer.
After the purchase of the property, the land office sends a decision on the registration of the new owner to the lawyer. After that, the tax authority determines the wealth transfer tax. After the purchase of the property, a 4% wealth transfer tax must be paid, which is determined based on the market value of the property. If the purchase price of the property exceeds HUF 1 billion, the tax is reduced to 2% instead of 4% for the portion above it, but the amount can be a maximum of HUF 200 million.
Immigration law does not preclude the investor from using, for example, renting out the property. A private individual can deduct 10% of the rental income as expenses without proof, and only 15% of personal income tax must be paid on the profit calculated in this way in Hungary.
The foreign investor can sell the property after five years. From the fifth year following the year of acquisition, the sale of real estate in Hungary is tax-free. A foreign investor does not have to pay tax in this case either, but in this case, it is advisable to check whether he has to pay tax in the country of his tax residence or whether there is an existing double tax treaty with Hungary.
The construction tax is a local tax, the amount of which is determined by the municipality of the given settlement, so it varies according to the location of the property. Some municipalities do not even set such a tax or only set it if the residential property is used for business purposes. The calculation is based on the useful area of the building in square meters or the adjusted turnover value of the building. Municipalities typically calculate the construction tax based on useful area, the amount of which varies from municipality to municipality, but is no more than HUF 1 100 per square meter (approx. EUR 3). The person who is the owner of the property on the first day of the calendar year is always obliged to pay the construction tax. The construction tax is paid twice a year, divided into equal parts.
Costs of buying and selling real estate in Hungary
- The sale and purchase of real estate is also subject to various costs, of which the buyer typically has to pay the following:
- The price of the title page is HUF 3,600 (approx. EUR 10).
- Purchase price of the property.
- The license fee at the government office is HUF 50,000 (approx. EUR 120) per property.
- The fee for the land registry procedure is HUF 6,600 (approx. EUR 15), and the fee for the out-of-order procedure is HUF 10,000 (approx. EUR 25).
- The property transfer tax is 4% of the market value of the property,
- The attorney’s fee for countersigning the sales contract is usually 1% of the purchase price.
Frequently asked questions and answers for international investors
Do you consider investing in Hungarian property, yet find yourself lacking sufficient information to make a decision? Our FAQ section answers the most common questions.
Can foreign investors purchase real estate in Hungary?
Hungary imposes restrictions on international investors for the purchase of properties and land. Mainly EU citizens enjoy the privilege to purchase easily real estate, excluding agricultural plots and architectural monuments.
What can disqualify an investor?
In cases of natural persons, the government office contacts the Hungarian Immigration Office and the Hungarian Police to conduct background checks. Any individual automatically disqualifies from progressing through the process, upon receiving arrest warrants or bans on entry and residence.
Who needs to obtain a government office permit to buy real estate in Hungary?
A government office permit is not required in the following cases:
- If the investor is an individual or a legal entity from a member state of the EU, encompassing:
- Austria
- Belgium
- Bulgaria
- Croatia
- Republic of Cyprus
- Czech Republic
- Denmark
- Estonia
- Finland
- France
- Germany
- Greece
- Hungary
- Ireland
- Italy
- Latvia
- Lithuania
- Luxembourg
- Malta
- Netherlands
- Poland
- Portugal
- Romania
- Slovakia
- Slovenia
- Spain
- Sweden
- If the investor holds Swiss citizenship.
- If the investor is an individual or a legal entity situated in a European Economic Area (EEA) state, encompassing:
- Norway
- Lichtenstein
- Iceland
- If the investor holds multiple citizenships, and one of them is Hungarian or from an EU member state.
Investors who acquire property through inheritance do not require a government office permit. In all other cases, a permit is necessary.
How long does it take to get the permit?
The government office holds the responsibility of making a permit decision. They must decide within 45 days.
What do experts foresee for the Hungarian real estate market?
The Hungarian Central Statistical Office (Központi Statisztikai Hivatal, KSH) reported in 2023 a staggering 310% surge in new property prices compared to those of 2015. As a result, the nominal value of an investment worth 500,000 EUR into Hungarian real estate during that year could stand at present as approximately 1,550,000 EUR.
Statista’s data, though unable to definitively predict future prices, suggests certain trends. By 2028, Statista projects that the Hungarian real estate market will maintain a steady annual growth rate of 4.99% and potentially escalate its market value to 1,64 trillion USD.
Do I need professional help for investing in property in Hungary?
Most foreign investors prefer seeking professional assistance for real estate investments in Hungary. Crystal Worldwide’s team of real estate experts will help you with real estate investments in Hungary, as well as with related tax, financial and legal information. Through our office in Budapest, we will prepare a personalized offer for you and assist you in arranging real estate investment and obtaining a guest investor residence permit. Contact us using the form below!