"Itt lakunk, a széles folyó mellett."
Translation:We live here, beside the wide river.
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That is correct. Based on the frequency of usage, "Where do you live?" should be translated as "Hol laksz?".
Literally, "lakni" means "to reside", "to have a place to call home" somewhere. Not surprisinly, one's home is also called a "lakás" (not so much indicating the type of property, than just the living space, wherever it is).
"Lak" - the root of the verb
"-ás" - a suffix that creates a noun from a verb