northern16 Feb 2010 21:04
Emerging skyline: investors are concentrating on prime office and retail properties in Poland and the Czech Republic
For central and eastern Europe’s crisis-hit property markets, the year could not have had a better start.
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For investors it is evidence of a recovery that began late last year, following a revival in west European prime commercial property and gains in global financial markets.
But property experts warn the rebound is fragile and limited, with investors concentrating on Poland and the Czech Republic and on prime office and retail properties. Real estate markets in countries still in recession, such as the Baltics, remain depressed.
Sylvia Gansser-Potts, director of property at the European Bank for Reconstruction and Development, says: “There’s not a lot of activity because investors are still sorting out portfolios and banks are reluctant to lend. But there has been an improvement over the last quarter. Poland stands out as the most attractive country. But other countries, such as the Baltic states, are another story.”
Property in central and eastern Europe (CEE) boomed pre-crisis, with investors driving prices close to west European levels, believing the region was rapidly converging with the wealthy west.
With banks offering cheap finance, investors flooded into the less developed markets of the Baltics, south east Europe and Ukraine.
But in mid-2008, when the global financial crisis erupted, panic hit CEE and its property market. Prices collapsed, yields soared, banks cut credit lines and investors ran into trouble. In Austria, the IATX property stock index, including companies with heavy CEE exposure, fell almost 90 per cent from peak to trough in early 2009. The IATX has since trebled but stands at only 30 per cent pre-crisis levels. Property companies forced into restructuring include some of the biggest names, such as France-based Orco.
But west European banks which dominate banking in CEE (except in Russia), have stood by subsidiaries.
With recovery in prospect – CEE is expected to see 2 per cent growth in gross domestic product this year after last year’s 7 per cent fall – bankers’ confidence is up though they remain cautious, not least over mounting non-performing loans.
The economic outlook varies, with Poland and the Czech Republic expected to do well, and the Baltics, Hungary, the Balkans and Ukraine in the doldrums.
Jos Tromp, head of CEE research at CB Richard Ellis, the property consultancy, says prospects reflect the macro-economic outlook. “In general there has been a
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