The UK's decision to leave the European Union has made little or no difference to investment markets in Central and Eastern Europe, according to new research by Colliers International released at PropertyEU's latest investment briefing on the region.
Mark Robinson, Colliers' CEE research specialist, told the event held at Collier's London offices that the CEE property investment sectors are still very active. Although the Polish market has softened a little since the UK referendum on 23 June, the markets in the Czech Republic, Hungary, Romania, Bulgaria and Slovakia are in line with, or up on, deal levels in the first half of this year.
The retail sector is the strongest with firming rents and high occupancy encouraging money into real estate. Brexit however still poses some risks to investment sentiment, currency and the threat of EU disintegration.
Other external risks include the rise of Russia, a possible EU banking crisis, higher interest rates as quantitative easing disappears, while Robinson warned that the real estate cycle is 'already long in the tooth.'
On the plus side, financial yield gaps in the CEE region generally remain wide. And there is some room for bond yields or interest rates to rise without threatening the property market. There is also strong internal demand in CEE markets, especially from consumers, said Robinson, while CEE convergence with western European countries will boost interest in the region’s real estate.
In addition, prudent macro-economic and property sector leverage management will encourage the flight to safety and the more favourable yields of investing in commercial property.
Demand, particularly from consumers, is strong and Robinson expects this to continue for the next two years, underpinned by significant wage growth in Czech Republic and Slovakia, although less so in Poland and Hungary; however Romania's wage levels are low and there is 'massive catch-up potential', he said.
