With their solvent banking systems that provide debt finance for property purchases, and with an active investment market for real estate, the Czech Republic, Slovakia, Poland and Russia are bracketed by the real estate company Colliers International as “Tier 1” markets in post-crisis Central and Eastern Europe. But could some of the other countries in the region be catching up with them?
That was the issue discussed by Colliers in a recent report titled Closing the Gap: Tier 1 and 2 Markets that set out to analyse the potential of the less-exalted parts of the CEE region.
About 80 per cent of property investment volume in the region is accounted for by the Czech Republic, Poland and Russia, but overall activity has dropped this year, continuing the falls already seen in 2012. This is attributed to deals taking longer to close post-crisis because of tougher due diligence and similar factors, and because of a lack of availability of investment property in Tier 1 markets.
It begs the question, according to Colliers, which has an office in Prague, of whether foreign capital will be redirected towards the more peripheral Tier 2 markets, in particular Hungary, Bulgaria and Romania.
The answer, Colliers suggests, could be yes, with all three countries having a relatively positive macroeconomic outlook. Romania, for example, has been praised for its fiscal belt tightening, and the economy there is forecast to grow by more than 2.5 per cent in 2014.
Especially in Romania and Bulgaria, the yields offered by property are sufficiently greater than those available from bonds that they justify the greater risk of investing. In Budapest the difference between property and bonds is not so great, but is still “attractive” according to Colliers.
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