Costs of Real Estate Transactions in Hungary

Costs of Real Estate Transactions in Hungary

B. BerdárGy. Fenyő B. Márkus

J. Nyiri

B. BerdárGy. Fenyő B. Márkus

J. Nyiri

ContentsContents

• The costs of transactions from a private person’s point of view;

• The real property transactions from the real estate developer’s point of view;

• The price of flats in Hungary;• The price of agricultural land in Hungary.

Transaction costsTransaction costs

Private person’s point of view• cost of the contract• cost of the real estate valuation• cost of the registration• wage of the notary • taxation and duties

Transaction costsTransaction costs

Private person’s point of view• cost of the contract

• When the contract is made by the lawyer, the cost depends on the purchase price.

• It is 0,5-1,5 % of the price.

Transaction costsTransaction costs

Private person’s point of view• cost of the contract• cost of the real estate valuation

• The wage of the valuation is 30 000 – 50 000 HUF.

Transaction costsTransaction costs

Private person’s point of view• cost of the contract• cost of the real estate valuation• cost of the registration

• Within 30 days after the date of the contract the case have to have to send to the District Land Office a request to register the right of the ownership. The registration cost is 2000 HUF.

Transaction costsTransaction costs

Private person’s point of view• cost of the contract• cost of the real estate valuation• cost of the registration• wage of the notary

• 500 000 – 5 000 000 HUF = 11 700 HUF + 1%;• 5 000 000 – 10 000 000 HUF = 56 700 HUF +

0,5 %;• over 10 000 000 HUF = 81 700 HUF + 0.25 %.

Transaction costsTransaction costs

Private person’s point of view• cost of the contract• cost of the real estate valuation• cost of the registration• wage of the notary • taxation and duties

• The general rate is 10 % + VAT. • For a housing property it is 2 % until 4 million

HUF and 6 % above. • Company trading of real estates it is 2 %, and

the real estate should be sold within two years

Real estate developer’s point of view Real estate developer’s point of view

The development procedure• buy a land (or land + construction)• develop the property (added value –

construction work)• let the property to tenants• sell the real property (with tenants) to an

investor

At the beginning of the procedure the developer is purchaser (buyer), in the second step is an owner, in the third phase is a landlord, and in the last stage is a seller or vendor.

Asset dealAsset deal

VAT• Commercial building 25%. • Residential building only the first sale is subject

to VAT. • From January 2004 VAT is charged on the sale of

land as well.

Transfer tax• The standard rate is 10%. This tax is payable by the company

(person) buying the real property, the base of the tax is the transaction price (VAT included).

• A reduced rate of 2% applies if the company acquiring the property is deemed to the real estate trading company.

• At the residential property the rate is 2% of the purchase price up to HUF 4 million and 6% the amount thereof.

Corporate tax of 16 % after the difference of the book value and the selling price.

The price of a houseThe price of a house

• Szentendre – parcel 263 sqm, house 70 sqm 157000 HUF/sqm

• Gárdony – parcel 646 sqm, house 76 sqm 138000 HUF/sqm

• Source: Gy Fenyő, March 2005

The price of flats in townsThe price of flats in towns

Source: Central Statistical Office *** The price is thousand HUF/square meter

The price of flatsThe price of flats

• Budapest – downtown• Buda – 450000 HUF/sqm• Pest – 330000 HUF/sqm

• Salgótarján• Centre – 140000 HUF/sqm• Outskirts – 80000 outskirts

• Source: Gy Fenyő, March 2005

The price of flats (1997)The price of flats (1997)

Source: Central Statistical Office

The price changing of flats - 1997-2002The price changing of flats - 1997-2002

Source

Difference from the average

Difference from the average

The price changing of flats (1997-2002)

The price changing of flats (1997-2002)

Source: Central Statistical Office

The price changing of flats (2002)The price changing of flats (2002)

Source: Central Statistical Office

The price changing of flats - Budapest

The price changing of flats - Budapest

Red line is price of the flats on the open market. Blue line is the value of the Duty Office.

Source: Tilk László Géza, www.ingatlan-online.com/

The prices adjust to the demand The prices adjust to the demand

The price of agricultural land The price of agricultural land

The price of agricultural landThe price of agricultural land

• North – Borsod 32000 HUF/ha• East – Békés 45000• South – Baranya 73000• West – Vas 62000

• Average 69747• Max 200000• Min 32000

• Source: TALC, March 2005

The price of agricultural land The price of agricultural land

The market prices are in average 5-10 times higher in the EU than in Hungary.

According to our conservative estimate, prices will go up at least 2-3 times in the next 2-3 years in Hungary. That means 30-40% per annum, the compounded interest taken into account. This income is remarkable comparing to the 10-20% income of alternative investments.

The price of agricultural land The price of agricultural land

In the valuation the following conditions should be taken also into consideration:

• in which part of the country the land is situated, • distance from cities, main roads, • accessibility,• system of irrigation, • weather and surface conditions, slope category, • slope aspect,• buildings and infrastructure.

GISS 2005GISS 2005