Hungary empowers local governments to pass laws restricting acquisition of property

A landmark law has come into force in Hungary, which grants local communities unprecedented powers to "safeguard their cultural identity and social fabric in the face of rapid demographic changes" by imposing restrictions on moving to the relevant municipality. Effective from 1 July 2025, the Law on Protecting Local Community Identity is designed to address concerns over mass immigration and speculative property purchases, which have threatened to alter the traditional character of towns and villages in some areas, especially in the Budapest agglomeration and along Lake Balaton.

The new legislation recognises the right of local communities to preserve their unique identity as fundamental. This comes after years of debate about balancing the interests of long-standing residents with those of newcomers and investors.

Key provisions of the law

Under the law, municipal governments are authorised to regulate who can settle in their communities and set conditions for property acquisitions. As a result of the measures, local councils can now do the following:

• impose restrictions or conditions on new residents and property buyers from outside the community;
• grant pre-emption rights to local residents and property owners when properties are sold;
• require monetary settlement contributions from newcomers;
• set specific criteria for establishing residence, such as community ties or local employment.

The law includes exemptions for close relatives of residents, individuals with historical connections to the locality, and those moving for work, education, or other essential reasons. The law also stipulates that restrictions must be applied fairly and without discrimination in a manner that respects human dignity.

Market impact

Supporters of the law argue that it is a necessary response to the pressures of urbanisation and rising property prices, which have made it increasingly difficult for young people to remain in their home communities, particularly in the Budapest metropolitan area and certain towns and villages around Lake Balaton. They point to cases where mass property purchases by outsiders have driven up prices and changed the social landscape, sometimes displacing local families.

Critics, however, warn that the law could have significant unintended consequences. Municipalities imposing these limitations could decrease the pool of potential real estate buyers and thus the demand for property, which could lead to lower property prices and fewer transactions. At the same time, neighbouring municipalities that do not impose these restrictions might experience increased demand and rising prices, resulting in a more fragmented real estate market. This effect may be especially noticeable in suburban areas, where people tend to move between communities easily.

The law could also influence mortgage lending. Banks may become more cautious about lending on properties in restricted areas, as reduced property values could affect collateral values.

Non-residential real estate could also be negatively affected since the pre-emption rights that local municipalities can introduce also covers other estate (e.g. retail, office or logistics) with the exception of agricultural land.

Violations of the law could result in the annulment of property transactions, the removal of unlawful residence registrations and fines.

Critics warn that the limitations imposed by the new law will not be registered in the land registry, which will weaken the reliability of the land registry system.

Only villages and smaller towns are expected to introduce these limitations. Budapest and larger regional cities are unlikely to introduce any limitations based on the law, which should limit the overall impact on the market.

For more details on this new law and how it could affect Hungary’s real estate market, contact your CMS client partner or these CMS experts.