Investing in HungaryPrices have been rising in Hungary now that it's in the eurofold - but properties there are still good value. Kevin O'Connorreports
BUDAPEST is one of the more promising locations for investment, according to Deirdre O'Regan. With a small portfolio of Irish properties, she felt future returns would not match the past: "I know from my rents, which have hardly moved in three years, that the best is over for the modest investor - so I looked abroad."
Trawling the net and comparing prices and yields, she found Budapest attractive, at least on paper. The reality was equally promising. "After two visits, I bought an office owned by a travel agent. He paid two years rent in advance, so I had that comfort. It was, as they say, a win-win deal."
The Hungarian owner got a lump of money and the Irish investor got a property with a yield of about 7 per cent. Current Irish returns are about 3-4 per cent on similar properties. She did it all on the net, without an agent - "found the property, corresponded with the seller and came out to meet him".
The tale did not surprise Odran Young, owner of a medium-sized estate agency in Dublin. He came out to live permanently in Budapest four years ago, lured by the promise of bargains in a country weaning itself away - at a fast pace - from a failed Communist system. Now he controls the only Irish agency with a full-time complement of staff in the Hungarian capital.
We were in a restaurant in Liszt Ferenc, an enclave of boulevards and restaurants. There is gaiety and business and music - it's an aria away from the fabled Opera House whose baroque splendour has been restored with dollops of eurodosh, a mere three years after Hungary emerged into the eurofold of favoured nations.
Already, he can see the signs of creeping prosperity, a re-run of the experience of the Irish republic. "When I came first, most of the cars were old bangers, Ladas on their last legs. Now most cars are hardly more than two years old. The cafés are full of well-dressed young people. Then, there was only one restaurant on Ferenc and four customers - me and three in our group."
A lot has changed since then, for both Budapest and Young. They have been agents of each other's change. From his penthouse overlooking the musical square, he counts 16 restaurants and café bars. He is selling some of those refurbished baroque buildings and uses the Hungarian capital to trawl for developments in Eastern Europe, notably in neighbouring Ukraine.
Hungary has been good to him, turning him from a medium-sized player in Irish property to a major wheeler-and-dealer of European property. Currently he has several new developments on the go in Budapest, including a block of "new build" apartments in the university district.
Of the 144 apartments, 80 have been sold off-plans. Not surprising given that prices range from €60,000 for one of about 37sq m (400sq ft). A Dublin equivalent, in quality and location, would cost upwards of €325,000. His buyers are mainly Irish, with British and South Africans as runners-up in the investment stakes.
Expanding his Budapest office this week to cater for the demand, he is bullish about Hungary's economic prospects. Well, he would be, wouldn't he?, given his own investment of time and monies. But external factors support his projections, with rents and wages rising at about 20 per cent in the past 18 months, while land values do not yet reflect that surge.
"Property prices are cheaper here than in most of the neighbouring countries - I can sell Budapest residential from €1,350 to €1,800 a sq m (€32 to €167 per sq ft), whereas Sofia (Bulgaria) is €2,000 a sq m (€185 per sq ft), Ukraine is about €4,000 a sq m (€371 per sq ft, payable in dollars) and Krakow has gone very expensive at €5,500 a sq m (€510 per sq ft)."
Still smarting under the rigour of communist control, major Hungarian banks accept existing properties as collateral for further loans, "rolling-over" the values, which was the financial base of the historic Irish property boom. "It took some lobbying, but finally the forint dropped," Young recalls. Some banks will now fund 70 per cent of a prospective purchase.
His forays into commercial property include shopping centres, entire office blocks, former government departments - bought by syndicates of investors whom he describes as " typically two or three Irish blokes, aged mid-30s to mid-40s, punting with some spare cash". (His definition of "spare cash", is elastic, given one buy of a shopping mall for €8 million).
THINKING big also drives the plans of Marty Carr, whose golf services company is a significant partner in Zala Springs, about two hours drive from Budapest. On a greenfield site in the wine region of Balaton, the 18-hole course is trumpeted as of "championship quality" with 7,200 yards of drives off the tees, and around 468 acres of playing.
Why Hungary for golf? "Because it was there!" is Carr's succinct answer, before supplying some figures. "Hungary has only seven golf courses, about one course for every 1.5 million of population; the comparable figure for Ireland is a course for every 12,000 people. Scion of the golfing family - "I have the name but not the game" - Marty's company, Carr Golf Services, manages six courses at home and partners investors to develop major courses overseas.
"Golf, wine and baths" is the working motto for a spa market that is currently fashionable. Zala Springs exploits the very Hungarian capacity for enjoying bathing in thermal waters (sometimes outdoor in winter!) as well as the region's vineyards.
Using golf as lure, investing partners have funded a new 397-unit resort. Family apartments and townhouses range from about 60-215sq m (645-2,217sq ft) costing from €128,000 to around €350,000 for detached golf villas on the fringes of the course. All are being sold off plans, with Carr claiming a 10 per cent uplift in price for buyers of the first phase. Housing completion is scheduled for end of 2007, with the course playable in spring of 2008.
Lisney is holding a property exhibition on Zala Springs in the Westbury Hotel, Dublin, this Friday aand Saturday, February 9th and 10th.
www.youngsbudapest.ie
www.casaro-hungary.com
www.zalasprings.com/www.lisney.com
