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MIDDLE EAST BUYERS LOOK TO BUDAPEST

Hungary’s capital city has been named Europe’s number one place to buy property. Cityscape takes a closer look at how Middle East buyers are investing in Budapest right now.

October 2015

Budapest, the capital of Hungary, straddles the Danube River and holds an important position in central Europe. Created in 1873 with the joining of Buda and Obuda on the west bank with Pest on the east bank, the city is now considered a financial hub of Central Europe – ranked third on Mastercard’s Emerging Markets Index in 2008. Conde Nast Traveler also ranked it as the world’s second best city in 2013 and Forbes has named it Europe’s 7th most idyllic place to live. Little wonder then that the city is now attracting a lot of attention from would-be property investors.

The Hungarian capital has been named Europe’s number one place to invest in property by the UK’s Telegraph newspaper on the basis of offering good yields, low to moderate transaction costs, and pro-landlord law.

According to CBRE, it has also become a growing target for Middle East investors over the past 18 months who increasingly look at Europe’s second-tier locations – one of them being Budapest.

JLL’s Budapest City Report Q2 2015 put the total transaction volume of the first half of 2015 at EUR 280 million – a much more active market than had been seen in recent years. The report went on to state that JLL expects the 2015 total annual investment volume to reach EUR 700-750 million, with increasing interest from both international investors and local funds.

“After a very challenging period in 2009-2014 with limited liquidity, the market has significantly recovered in 2014 and is now gaining momentum,” said Benjamin Perez-Ellischewitz, Head of Capital Markets, JLL Hungary.

According to Perez-Ellischewitz, the interest of investors is supported by the alignment of four major drivers: Positive macro-economic indicators; positive trend on the leasing market with a robust take up and a sharp decrease in vacancies in office and logistics; an increase in retail sales thanks to an increase in disposal income; and the progressive return of debt finance by banks.

Recent transactions

The most sought after asset class in H1 2015, according to JLL’s Budapest City Report, was office, representing 34% of the transactional volume, followed by retail and industrial with 26% and 22% respectively.

The return of institutional investors and portfolio transactions meant that the average transaction size increased remarkably at the start of the year, compared to previous years.

According to JLL’s CEE Investment Pulse H1 2015 report, notable transactions for offices are mainly composed of portfolio transactions. One such transaction was Europa Capital and Convergence’s acquisition of a value-add office portfolio including the three foreclosed offices of Volksbank Austria composed of Kalvin Centre, Duna Office Centre and the B52 office building. The transaction value reportedly stood at EUR 30 million.

The largest retail transaction in the first half of the year was the disposal of Premier Outlet Centre’s two phases by AVIVA to Lone Star as part of a CEE portfolio of some EUR 200 million of assets. 

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