‘Hungary has now become a core market and has the biggest potential for growth in the region,’ said Vlaho Kojakovic, senior banker at the European Bank for Reconstruction and Development (EBRD) in London. ‘The market is awash with liquidity.’

A liquid market is favoured by foreign investors who want the option of an easy exit, said Bence Vecsey, director and head of investment for Hungary at Colliers International. ‘Budapest is seen as a safe haven by international capital. There has been a dramatic change in investors, there are less people here to make a quick profit and there is more serious long-term money.’

It is no coincidence that a US giant like BlackRock has just announced it is opening an office in Budapest and planning to build ‘a significant presence’ in the country.

Numbers confirm the growth of the market in the last few years. ‘In 1997 total office stock in Budapest was 500,000 m2, while now it is 3.8 million m2. Retail was 130,000 m2, now it is between 800,000 m2 and 1 million m2. Prime yields were 11.5%, now they are between 6.5 and 7%,’ said Arpad Torok, CEO of Trigranit, which this year celebrates 20 years in the business.

‘There has been a huge change in perspective, volume, stock quality and availability of finance,’ Torok said. ‘In 1997 we were just beginning to learn, but real estate in Hungary today is a sophisticated industry, on a par with the rest of the world.’

Changing perceptions

Foreign investors’ perceptions of the country have changed just as much, said Lila Pateraki, director of investments at Zeus Capital Management in Greece: ‘A few years ago it was a tough sell because the political situation was not reassuring. Only the yield spreads between Hungary and other CEE countries made it an attractive opportunity.’

Since then, however, ‘Hungary has done an amazing job selling itself,’ she said, and investors believe the political risk 'is no longer so important, especially compared to what is happening in the rest of the world'.

Comparisons with other countries now work in Hungary’s favour, underpinned by strong economic growth and good fundamentals, said Tibor Tatár, CEO of Futureal: ‘The perception of the country has changed, as Budapest’s booming office market demonstrates.’

Occupancy rates are at historic highs in the capital, where the office pipeline is restricted and demand remains strong. This year, according to Colliers International forecasts, the 10% vacancy rate will narrow further to 7%. ‘Offices are the safest asset class to invest in,’ said Vecsey.

‘We are still way behind Germany,’ said Torok. ‘I believe Budapest will see office development and growth in the sector for the next three years.’