Why Israeli investors buying property in Budapest, and how the two markets compare

Empire Holdings
4 days ago
5 min read

Budapest been an attractive option for Israeli investors who want higher rental yields than most Israeli cities, lower entry prices per square metre, exposure to the EU market, and portfolio diversification, read why Israeli investors buying properties in Budapest

Top reasons Israeli investors look to Budapest Properties

#1 - Better rental yields (generally)

Budapest routinely shows higher gross rental yields than major Israeli cities. Recent market surveys put Budapest gross yields around the ~5.8% range (central districts typically 4.8–6.8% gross), while Tel Aviv and Jerusalem often show gross yields closer to ~2–3.6%. For yield-seeking investors this gap is a clear draw.

#2 - Much lower purchase prices per m² (lower cost of entry)

Average asking prices per square metre in Budapest remain materially below those of Tel Aviv / central Israel. That means a given investment amount can buy larger or multiple units in Budapest, improving diversification and operational flexibility (e.g., buy two smaller flats instead of one expensive apartment). (See market price indices and price/m² comparisons in market guides.)

"Budapest is the rising star of the European real estate markets in the last 5 years" – EU Real Estate specialist say

Tip #3 - EU market access and tenant diversity

Buying in Hungary gives investors access to the EU rental market, with demand drivers that include:

tourism and short-break visitors (Budapest is a major Central European destination),
international students (large universities),
young professionals working in regional offices and the rising tech/outsourcing sectors.

This tenant diversity can help stabilize occupancy versus relying on a single domestic economy.

Tip #4 - Tax and company structures can be attractive

Hungary’s corporate tax rate is low compared with many EU peers (9% corporate tax for companies), and personal/capital gains / rental income rules can be workable for foreign investors (flat personal tax on rental income, capital-gains rules with reductions for longer ownership). That said, exact tax outcomes depend on structure (personal vs company ownership) and double-tax treaties — so always model your specific case with a local tax advisor.

Tip #5 - Potential residency pathways (with caveats)

Hungary has offered residency-by-investment options tied to real-estate funds and qualifying investments in recent years (program details and thresholds have changed and can require investments in government-approved funds of significant size, commonly quoted thresholds in the mid -€200k to €350k+ range depending on the exact product and time). If residency access matters, structure the purchase and fund selection with immigration counsel.

Its anther good reason Israeli investors buying properties in Budapest

Practical advantages for Israeli investors specifically

Currency diversification: Holding a euro-area asset is a hedge against NIS-specific shocks.
Portfolio size: Lower property prices mean even modest Israeli capital can buy a meaningful real-estate footprint.
Arbitrage opportunity: If Israeli property prices are high and yields compressing, Budapest can offer a relative value play.
Tourist & student demand: Israeli investors familiar with renting to short-let or student markets can apply similar operating models (subject to local regulations).

Key risks and constraints (don’t skip these)

Regulatory changes to short-term rentals: Budapest has seen local measures and discussions to limit short-term rentals (some districts voting bans and national discussions on moratoria/tax changes). That can materially affect SEASONAL/short-let business plans. Always check the current municipal rules for the district you buy in.
Macro / political risk: Hungary has had periods of economic and political volatility; inflation and currency (forint) swings can affect real returns and repatriation plans. Recent official housing reports show changing dynamics in demand and prices, so monitor macro indicators.
Financing & legal details: Mortgage availability and terms for non-residents, tax residency rules, and transaction costs differ from Israel — get local legal and mortgage advice.
Management & distance: If you won’t live in Hungary, factor in property management, tenant screening, and potential language/cultural gaps (local agents can help).

How Israeli investors typically structure purchases

Direct ownership (private) — simplest but consider double tax treaty, reporting and exit taxes.
Hungarian company — used by investors who want corporate tax treatment, asset separation, or let management be local; corporate tax in Hungary is comparatively low.
Real-estate fund / developers — for investors who prefer hands-off exposure or want to use vehicle-based residency programs.

Metric	Israel (Tel Aviv / major cities)	Hungary (Budapest - central districts)
Typical gross rental yield (city centre)	~2.0–3.6% (Tel Aviv often ~3–3.5%).	~4.8–6.8% (Budapest average ~5.5% )
Typical price per m² (centre)	Very high — among the highest in the region (Tel Aviv premium). (Market datapoints vary by neighbourhood.)	Lower than Israeli city centres — meaning more square metres per Euro invested.
Rental income tax	Progressive income tax rates; landlord tax treatment depends on structure and allowances.	Flat personal tax on rental income often as 15% (with deductions allowed); companies taxed differently.
Capital gains tax on property sale	Complex, can be significant depending on holding period and exemptions.	~15% personal capital gains on property (with rules that reduce taxable portion after longer ownership).
Corporate tax (if owning via company)	Corporate tax rates ~23% (check current rates and rules).	9% corporate tax — among the lowest in the EU (advantage for company structures).
Financing availability for foreigners	Mortgages available but with strict lending and high prices (varies by bank).	Mortgages for foreigners exist, but terms and LTV vary by bank; local lenders often require stronger documentation.
Short-let / Airbnb regulatory risk	Regulations exist and have tightened in places; market still strong.	Recent district votes and national proposals have targeted short-term rentals — a material operational risk for short-let business models.
Market liquidity	High in prime Israeli cities but very expensive to enter/scale.	Good liquidity in Budapest but smaller market than large Western EU capitals; easier to buy multiple smaller units for same capital.
Typical tenant pools	Local professionals, young families, sometimes expats; strong domestic demand.	Tourists, students, expat professionals, locals — a more mixed tenant base.
Currency exposure	NIS — repatriation to NIS known for Israeli investors.	EUR exposure (but Hungary uses the forint — currency exposure depends on whether rents/prices are forint or euro); exchange rate risk versus NIS.
Residency pathways linked to property	Buying property does not usually grant residency; investment rules differ.	Hungary has offered residency/fund-based routes in the past for qualifying investments (thresholds and program rules vary). Confirm current rules before relying on residency benefits.

(Notes: metrics are directional; local micro-market research and up-to-date legal/tax checks are essential.)

Investment ideas / strategies for Israeli buyers

Buy 1–3 central flats aimed at medium-term rentals (young professionals / students) to capture stable occupancy and avoid full reliance on short-lets.
Buy for long-term capital appreciation + rental yield — use Hungarian company structures if tax efficient for your case.
Value-add play — renovate older central flats and improve net yields, typical for investors who can supervise works.
Fund or developer exposure — if you prefer passive exposure or want to explore residency linked vehicles.

Key Insights from the Model (Summary Euro on Euro)

Metric (10-Year Result)	Budapest 🇭🇺	Tel Aviv 🇮🇱
Net initial investment (after costs)	€188,000	€188,000
Avg. annual net rent (after vacancy, costs & tax)	~€9,400 / year	~5,500 / year
10-year total rental income (approx)	€94,000	€55,000
Property value after 10 years	~€334,000	~€295,000
Total estimated value after 10 yrs (rent + property)	~€428,000	~€350,000
Total 10-year ROI on invested capital	~128%	~86%

🔹 Budapest generates ~70% more rental income than Tel Aviv

🔹 Property value grows faster in Budapest (with the assumptions used)

🔹 Total 10-year investor gain is ~€78,000 higher in Budapest

Source: Multiple source including Empire Real Estate, Investropa, Global Property Guide, MNB and international analysts