“When Airbnb burst onto the scene in the early 2010s, there was simply no better deal,” says Mária from Budapest, who now rents out three apartments for short stays in Budapest and two vacation homes in the countryside.
She was able to take out a loan in 2012 to buy a small apartment in the city center by covering the repayment with three days’ rent. Every other day, she rented her apartment, she made almost pure profit.
This unprecedented opportunity has been seen by many. Between 2010 and 2019, the number of Airbnbs in Budapest increased tenfold: in a decade, the stock of short-term rentals increased from 1,059 to 10,801. This figure has since fallen to around 7,400, probably due to Covid. And the upward effect of this trend on rents was clearly visible as these apartments ebbed back into the long-term rental market amid the Covid lockdowns.
The rich reallocate assets
“What characterized the Hungarian real estate market in recent years until the Covid crisis was that it was a potential investment alternative in an environment where it offered high returns compared to d ‘other investment alternatives and wasn’t that hard to get out of, so the market was well-rotating and liquid,’ says economist Ferenc Büttl.
József Hegedüs, director of the Metropolitan Research Institute in Budapest, says there was a noticeable portfolio shift by the upper middle class from mutual funds to housing around 2016.
According to the Household Wealth Survey of the Hungarian National Bank (MNB), between 2014 and 2020, households’ non-residential real estate assets increased by 90%, while their financial assets increased by only 73%.
The MNB is currently running a project that examines the impact of investment purchases on house prices. When questioned, they preliminarily stated that the growth rate is higher where there are more investors. This mainly concerns the economically successful capitals, the area around Lake Balaton and the central districts of Budapest.
The fact that there is also investor behavior behind the price increases is undisputed. “We don’t really see any other reason, there’s no demographic reason whatsoever. Behind the boom is also the financial behavior of a relatively small group of people,” says Hegedüs.
Zoltán Ladányi, Director of KPMG Hungary’s property advisory business, adds: “In Budapest, a significant proportion of apartments have been explicitly priced as an investment asset in recent years, which has driven up prices. very markedly.
The investor approach is also evident in data from real estate agency Duna House. In 2018, every second home in Budapest was bought for investment purposes, and since 2014, investment has always been the main reason for buying a house.
From 2010 to 2021, housing prices in Hungary increased by 120% and rents by 50%.
The Airbnb effect
Speaking to several Airbnb owners in Budapest, they all said that while there are tax evaders in short-term rentals, it’s worth doing it legally and tax-wise, even if it’s a lot of money. cumbersome administration. “It’s virtually Airbnb risk-free with unofficial accommodation,” says Gergely, another Airbnb host. “Local authorities have no legal or operational means to take action against them.”
Airbnbs in Hungary enjoys flexible tax policies and operates with virtually no restrictions. An apartment, if it is well located, can easily bring in 1 million forints (around €2,500) per month in Budapest, and the tax burden is among the lowest in Europe. Most of it can be paid for in a flat rate fee: 38,400 forints (€92) per room per year.
The government has left it up to local authorities to regulate, but there are essentially no obstacles in Airbnbs’ way – unlike places like Barcelona, Berlin and Lisbon where various short-term rental regulations are now in place . At most, individual owners are asked for a parking space, and condominiums can decide whether or not to authorize the transformation of an additional accommodation into an Airbnb.
“What common sense public policy dictates, regardless of party affiliation, from Berlin to New York – that there should be a clear need to restrict Airbnbs – is not seen as the case in Budapest. “, says Bálint Misetics, Senior Housing Advisor. and social policy to the Mayor of Budapest. “It would be strange if everyone were wrong about that.”
The state looks away
The high returns offered by Airbnb are only partly explained by the favorable tax environment. Because the tax burden on long-term expenditure is even lower in reality. However, tourists who rent apartments on Airbnb are much more creditworthy than Hungarians, which is why rental apartments are disappearing from the market in the long term.
In the former socialist countries, the proportion of owner-occupiers is very high, which is why it is not attractive for large investors to enter the Hungarian rental market. Even if in Budapest the share of tenants has gone from 7.3% to almost 10% over the last 10 years. The other reason is that private owners have a very high level of tax avoidance.
Economist Ferenc Büttl estimates that around one in 10 landlords pays the standard 15% tax on rents. However, companies cannot get away with this and they are also liable for VAT.
“This kind of gray income or black income may sound strange, but it is compensation for the middle class. In Hungary, you don’t earn as much as an Austrian doctor or an Irish university professor,” explains Büttl: “But if you have an apartment inherited from your grandmother or if you have two or three apartments somewhere, you can rent it and the authorities look away. No government has dared to touch it.”
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