New law: What does the protection of local identity law means for real estate buyers in Hungary

New Law in Hungary: What Does Protecting Local Identity Mean for Property Buyers?

Published on June 13, 2025
Keywords: Buying a house in Hungary, Purchasing property in Hungary, Local identity protection, Right of first refusal, Settlement tax

On June 11, 2025, the Hungarian Parliament passed a new law regulating the protection of local identity. This law, which will take effect on July 1, 2025, could impact people looking to buy a house in Hungary or purchase property in Hungary. 
 

Summary:

Local administrations have significant freedom in choosing legal protection instruments and setting the conditions for their application.

In practice, this means that municipalities MAY, but are not required to, take the following restrictive measures based on local regulations:

1. Right of first refusal regulation,
2. Restrictions or conditions for establishing a residential address,
3. Imposition of a settlement tax

Municipalities can choose one or more of the above options and also have the possibility to protect only specific parts of the settlement regarding address and taxation. The complete exclusion of property purchases was removed from the KTM proposal after public consultation. 

Exceptions: 

• Essentially residents of the municipality, their relatives, and property owners in the municipality
• Based on the draft law, no immigration restrictions or legal protection measures can apply to companies and foundations, as only natural persons are considered immigrants!

The local administration may amend the legal protection measures at most once per calendar year and also has the right to freely introduce exceptions.

But what does this mean for you as a potential buyer? In this article, we explain the law simply and clearly so you know what to look out for.
 

What is the Purpose of the Law?

The law on the protection of local identity was developed by the Hungarian Ministry of Public Administration and Regional Development to give Hungarian villages and towns more control over their development. It aims to ensure that communities can preserve their traditions, values, and way of life, even when many new residents or investors arrive. In short: communities should be able to decide who settles and under what conditions.

The law seeks to balance the rights of individuals (e.g., property buyers) with the interests of the community. It aims to prevent rapid population growth or property purchases from altering a community’s character, for example, through rising property prices or displacement of the local population.
 

What Changes for Property Buyers?

The law gives municipalities new options to introduce rules for immigration and property purchases. Here are the key points that could affect prospective property buyers looking to buy a house in Hungary:
 

1. Right of First Refusal for Locals

Municipalities can establish that locals have a right of first refusal when a property is sold. This means that certain individuals or the municipality itself can purchase the property before it is offered to an outsider. 

For which types of properties can local authorities impose restrictions?

Restrictions may apply to any property, except:

• Agricultural land as defined by the Land Transaction Act (e.g., farmland, meadows, pastures, forests – but not enclosed horticultural plots!)
• Properties subject to a building ban, construction prohibition, or modification ban within the last ten years before this law takes effect
• Properties created with building rights.

The local administration may also specify that the right of first refusal applies only to certain types of property.

The order of priority for those with the right of first refusal is:

• The municipality or a company controlled by it.
• Owners of neighboring properties, provided they have owned the property for at least 5 years
• Other locals who have owned property in the municipality for at least 5 years. Those with closer properties take precedence.

What does this mean for property buyers?
If you want to buy a property and the municipality has established right-of-first-refusal rules, you must wait until those with priority (within 30 days) decide whether they want to purchase the property after the sales contract is published. The seller must submit the purchase offer to the notary, who informs the eligible parties.

Tip: Transfers to companies might bypass the right of first refusal, but such procedures must be carefully reviewed as they can be legally risky.
 

2. Restrictions on Residential Address Registration

Municipalities can prohibit or impose conditions on registering a residential address.

For example, they could require that you:

• Meet certain conditions (e.g., contribute to the community).
• Respect the traditions and values of the community.
• Take on a public interest contribution (e.g., volunteer activities).

The municipality’s approval is required if such conditions apply. An exception exists in that the residential address cannot be prohibited if, at the time the law takes effect, a building is constructed on an existing building plot.

What does this mean for property buyers?
If you want to live in Hungary, check whether the municipality has introduced such rules. Without registering a residential address, you could face difficulties with authorities or integration.
 

3. Settlement Tax

Municipalities can impose a settlement tax if the population exceeds a certain threshold. This tax applies to new residents or property buyers. The amount and specific rules are determined by the municipality.

What does this mean for property buyers?
When buying a house in Hungary, additional costs may arise if the municipality has introduced this tax. Check with the municipality in advance to find out whether and how high the tax is.
 

4. Exceptions to the Law

Not everyone is subject to the new rules.

The following persons are exempt:

• People whose place of origin is the municipality.
• Relatives of locals who live or own property in the municipality.
• Persons who can prove that they or a relative lived in the municipality for at least 12 months during their first 10 years of life.
• State or municipal employees working in the municipality.
• Persons who can prove that their settlement is for the purpose of pursuing a professional activity in the municipality.
• Persons who wish to work in the municipality and improve the community’s quality of life.
• Buyers using state housing subsidies.
• Church employees, students, residents of social institutions, or tourists (using accommodation alone does not count as residency).

Companies (e.g., firms or foundations) are not subject to restrictions, as the law only applies to natural persons. This means that a company can buy a house in Hungary without issues, but registering a residential address for individuals could be challenging.

Additionally, the municipal administration can, by regulation, exempt other groups of people or establish more favorable settlement conditions for them.

What does this mean for property buyers?
If you meet one of these exceptions, you have free access to the property market. Alternatively, you could set up a company to purchase property, but legal advice is necessary to avoid risks.
 

Why Was the Law Introduced?

The law has three main objectives:

1. Community Self-Protection: Communities should preserve their cultural and social identity, especially when rapid changes (e.g., through immigration) threaten it.

2. Protection of Values: Traditions, customs, and the character of villages and towns should be preserved for future generations.

3. Control over Immigration: Communities can prevent too many people from moving in at once, which could lead to rising property prices or social tensions.
 

What Does This Mean for German and Swiss Property Buyers?

For German and Swiss buyers looking to buy a house in Hungary, there is no direct discrimination – the law treats all natural persons equally, whether Hungarian or foreign. However, the new rules could make the purchase process more complex, especially in municipalities that introduce strict regulations.

Here are the key points again:

• Right of First Refusal: You may have to wait until locals waive their right of first refusal, which can delay the purchase.
• Settlement Tax: In some municipalities, additional costs may apply if the population threshold is reached.
• Residential Address Registration: If you want to live in Hungary, conditions such as community contributions or cultural adaptation may be required.

Good news: There is no complete ban on property purchases, and companies are exempt from the law. Additionally, municipalities can set exceptions, making the process more flexible. In practice, much depends on how municipalities implement the law. Places that benefit from investments and new residents are likely to avoid strict restrictions.

Tip: Check with the municipality in advance about local rules where you want to buy a property. A local real estate agent can help understand the regulations and explore possible procedures (e.g., purchasing through a company).
 

What Happens Next?

The law takes effect on July 1, 2025, and will be supplemented by a government regulation clarifying further details. So far, it remains unclear how many municipalities will use the new options. In popular regions or rural areas attracting many foreign buyers, the rules might be stricter. This could, for example, affect some municipalities for houses at Lake Balaton. On the other hand, municipalities that benefit economically from immigration are often more open to new residents.

Tip for buyers: Contact us or local authorities to clarify the rules on-site.
 

Conclusion

The new law on protecting local identity gives Hungarian municipalities more control over immigration and property purchases, but it does not fundamentally prohibit property purchases. For buyers, this means: Get informed early about the rules of the municipality where you want to buy a house in Hungary. Rights of first refusal, residential address conditions, or a settlement tax could affect the process, but with good planning and advice, Hungary’s property market remains accessible – especially for investors or those with state subsidies.

Have questions about the law or need tips on how to buy a house in Hungary? Just call or send an email – we are your favorite real estate agent!
 

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If you’re already in property search mode, here are our main property types in Hungary and at Lake Balaton:

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Author: Dr. Peik Langerwisch

The author, after studying business administration with a degree as a Diplomkaufmann and earning a magna cum laude doctorate in management, worked for twenty years in global consulting firms and banks and now leverages his expertise as a real estate agent for properties in Hungary.

Brief overview of expertise and career