Irish property speculators are swapping Guinness for goulash in the hope of a "Celtic Tiger"-style boom in the Hungarian capital Budapest.
Brimming with the proceeds of their own housing market bonanza, Irish investors are snapping up apartments in the so-called "Queen of the Danube", convinced Hungary's recent entry into the European Union paves the way for juicy returns.
"The Irish can see the potential, they saw what happened in Dublin," said Damian Power, a partner of Eastern European Properties, one of a burgeoning number of Irish companies offering to guide investors through the buying process.
"They also have, in many cases, substantial equity on their own houses that they can release but there's nowhere left in Ireland to place the cash," he said.
Irish house prices have rocketed in tandem with an unprecedented boom -- underpinned by EU structural funds -- which turbo-boosted incomes and triggered a huge upsurge in housing demand from immigrants and returning emigrants.
In the more salubrious parts of Dublin, south of the River Liffey, prices have risen by as much as 500 percent in less than a decade, but most analysts believe the market has peaked.
Power said property in Budapest was half to a third of the price to be found in Dublin and while better bargains might be possible in some of the other new kids on the EU bloc, Hungary was deemed to have the safest legal structure.
He said the average expenditure by his clients was around 100,000 euros ($119,900) and that investors were hoping for Dublin-type returns by 2011 -- by which time Hungary, which has blossomed since the fall of communism in 1990, was also likely to have adopted the euro currency.
BUYER BEWARE
According to a report in Hungarian daily Napi Gazdasag, Irish citizens purchased 178 apartments in Budapest in the first quarter of the year, up from four in the same period of 2003. British investors, the second biggest foreign buyers after the Irish, bought just 18 during the first three months.
However, Irish newspapers, which carry increasing numbers of advertisements for property in Budapest and eastern Europe generally, have also struck a note of caution with reports of unscrupulous agents vastly overcharging foreign speculators.
Other horror stories have surfaced of mafia types who trick people into buying property that was never for sale.
High levels of bureaucracy and language barriers are also cited as potential pitfalls for investors venturing east, along with a lack of mortgage facilities in Hungary, although this is expected to free up under EU membership.
Harry Sexton, managing director of Budapest Property Solutions, believes the Budapest market has been oversold.
"Budapest was cheap up until a year ago but in the last six months there has been very heavy marketing in Ireland and that has led to a stampede and to people paying too much," he said.
Sexton, who has shifted the focus of his business from the residential market to the city's commercial sector, said unrealistic rental expectations had been created: "It has been stoked up by Irish agents who are getting tremendous commissions and probably picking up fees on both sides."
He said Irish investors attempting to keep ahead of the posse were already on their way to places like EU hopeful Bulgaria, Croatia, and China's largest city Shanghai.
Source: Reuters
10.05.2004