Invest in Hungary

Property Hotspot : Hungary

Summary

Hungary is undoubtedly dominated by its capital city, Budapest. Not only is the city home to about 2 million people, but it also accounts for over 60 per cent of the country's commercial activity. This is largely due to that fact that foreign companies are attracted by the low operating costs, the low cost of living and a well-educated population.

Budapest has been dubbed the "Pearl of the Danube" and the "Paris of the East" because it is blessed with both natural beauty and a rich culture. It is an elegant, vibrant, liveable and pleasant city that throbs with life morning, noon and night. With its architectural beauty and financial growth, Budapest has become an ideal location for investors.

Hungary, and Budapest in particular, offer a great opportunity for growth to investors - and the stable economy suggests this will remain true for a good while to come.

• Property
• Tourism
• Economy
• Politics

Why Hungary?

• Hungary is one of the fastest growing, fully-functioning market economies in Eastern Europe
• Since the end of the Communist era, Hungary has attracted $24.4 billion Foreign Direct Investment
• Productivity in Hungary has risen by an average of 13% every year
• Hungary was the first Eastern European country to join the World Bank and the IMF. It was also the first Eastern European country to sign up for NATO and the first Eastern European country to join to apply for EU membership
• Hungary's accession to the EU has given its economy an even greater boost and has had a very positive effect on property prices
• Budget airlines operate daily services to Budapest and Ryanair have just started new cheap flights to the increasingly popular Lake Balaton
• Stricter EU regulations will be enforced in the Hungarian property market leading to greater stability

Property

Property prices in Hungary have traditionally reflected its Eastern European location but are fast catching up to prices prevalent in Western Europe due to the attractive combination of historical preservation and economic stability that Hungary and specifically Budapest offers. Prices of existing apartments in Budapest rose by 13.2% in 2006, on top of a 4.17% rise in 2005 but Budapest premier city centre average prices per square meter are still the 5th lowest in Europe.

According to the 2007 Index of Economic Freedom, (prepared by the Heritage Foundation and the Wall Street Journal) property rights are scored at 70/100; higher than regional competitors such as Italy, Slovenia, and Croatia. This amply demonstrates the underlying regulatory strength behind the Hungarian property market.

Tourism

Hungary is one of Europe's most exciting and popular tourist destinations. Overall, the tourism sector generates $17.1 billion worth of economic activity and is estimated to sustain 310,000 jobs or 7.8% of total employment in 2007. The 12 million tourists Hungary receives annually puts the country among the top 20 destinations in the world, according to the World Tourism Organization.

Hungary’s transport sector is also developing rapidly. The largest international airport, Budapest’s Ferihegy Airport is now majority owned by the HOCHTIEF AirPort Consortium after it bought out BAA in June 2007. The new management has unveiled a 261 million EUR development plan for the airport by significantly redeveloping Terminals 1 and 2, building a new cargo base near Terminal 2, and developing an ambitious ‘Airport City’ near the airport with hotel and conference facilities, car parking, and a business and trade park. Outside Budapest, Sármellék International Airport near Lake Balaton has recently been linked with London Stansted with the advent of a 4 times a week. The ambitious M0 link road around Budapest is slowly taking shape and cargo traffic along the Danube is being encouraged with several high-profile investments that will foster greater integration with Europe.

Economy

The Hungarian economy, though growing slower than some other Eastern European countries presently, can be characterized by steady progress since the fall of Communism as the country has escaped some of the more harmful effects of instant liberalization. It is widely described as having undergone the smoothest transition to Western-style democracy among all former Soviet republics.

With EU accession in 2004, there has been a massive influx of funds from the European community that has almost completely integrated the Hungarian economy into the wider European one. Membership of the EU has already and will continue to lead to greater mobility in the wider region resulting in positive effects on the workforce and the property market. Large investments in infrastructure (10 -11 billion EUR until 2010) are also expected and GDP growth rates are expected to have increased by 1% since accession. Non-tangible benefits include the perception of stability and transparency which have accrued to the country.

Numerous reports have highlighted the strong scientific institutions available in the country, which produce an enviable number of scientists and engineers. For this reason many leading multinational corporations have set up offices and, in some cases, European headquarters in the country – including General Electric, EDS, and Exxon Mobil. In total, foreign direct investment in 2005 was approximately $6.7 billion, compared to $3.9 billion in 2001.

The current ruling coalition has implemented significant economic reforms aimed at reducing the European Union’s largest budget deficit of 9.2% in 2006 to a more manageable 3.2% by 2009. This is all part of the eventual goal of fulfilling the requirements for euro zone membership for entry between 2010 and 2014. With the current austerity program in place, GDP growth is estimated to have slowed to 2.7% in 2007 but is forecast to pick up to 3% in 2008 and 4% by 2009..

Politics

Hungary is a parliamentary democracy with a ceremonial president elected by the National Assembly every 5 years. The National Assembly has 386 members elected by popular vote under a system of proportional and direct representation to serve four-year terms. The next national elections will be in 2010. The Prime Minister, Ferenc Gyurcsany, was re-elected in April 2006 in a legislative vote of 197 to 12. The two political parties which dominate politics in Hungary are the Hungarian Socialist Party (MSZP), which is actually a social democratic party with a strong pro-market agenda, and the Hungarian Civic Union or Fidesz party, which operates on a centre-right, conservative, and Christian democratic platform. The current coalition is made up of the MSZP and the Alliance of Free Democrats (SZDSZ) with Fidesz comprising the opposition.

The political environment in Hungary is stable and transparent. The government is committed to a cost efficient, smaller state, and for credibility and predictability, which are all vital signs of stability for investors.