Look Beyond the Euro

October 16, 2007
Paris, France

While worldwide media coverage is focusing on an ever-stronger euro, smart readers are exploring other options: 14 of the EU member countries do not use the euro right now. Although the U.K. and Denmark have special derogations, and Malta and Cyprus are set to join next year, you still have plenty of other ways to make your dollar go further in Europe.

Here’s just one example: At the time of writing you can get 176.40 Hungary forints for $1. The forint is worth watching and has been gaining in value against the dollar (the greenback has lost 21% over the past 12 months). Hungary, with its solid infrastructure and long-term political stability, is one of eastern Europe’s most developed markets. It would make sense to invest here before the dollar continues its likely freefall.

Property prices in Hungary are attractive. In January this year, an average price for an apartment square meter in Budapest was $2,549. In the capital’s up-and-coming 7th district you can pick up a brand-new two-bedroom apartment (850 square feet) for $117,650. This district has a park and is not far from one of the stations on the new underground line. Budapest generates 60% of the country’s total commercial activity, and the population is growing as a result. Demand for rented accommodation is growing faster than new housing is available.

In the countryside, cottages go for pocket money: About 15 miles from Lake Balaton (the largest lake in Europe) you can find a cozy country retreat with a third of an acre, garage, and wine cellars for just under $21,230. Hungary has the largest incidence of second home ownership of all Eastern European countries because of its stunning countryside.

Property in this country could prove a valuable asset in your portfolio. The rental market here is young and growing, with a healthy demand for good quality new builds—rental yields are 5% to 7% on average, and rental laws are strict on non-paying tenants. Core inflation is at 5.5%, down from 9% last March after the government introduced austerity measures, and is expected to continue to fall. As soon as it reaches the magic 2% figure to meet EU requirements to join the euro, property is set to appreciate still further in this centrally located country. And today’s renters will be tomorrow’s buyers, providing you with an exit strategy.

As real estate guru Lief Simon says, it’s not too late to begin diversifying your property portfolio outside the U.S. We’ll be bringing you other options for your dollar in Europe in future Europe First Alerts.

Best regards,

Maria Savage
International Living’s Europe Consultant