Buyers and sellers remain far apart in CEE

A number of vendors in Central and Eastern Europe (CEE) are steering clear of openly marketing their assets because they are not sure they will sell, according to Andreas Ridder, head of CEE at CBRE.

While there is a lot of investor demand for prime assets in Poland and the Czech Republic in particular and plenty of assets available for sale, the parties are not ready to compromise, he said during PropertyEU's recent Investment Briefing on the CEE. 'The problem is that vendors are being very difficult because they feel they are in a booming market and can ask the best price for any product.'

Buyers are also holding firm, he added. 'They feel they are going into a challenging region and want to buy only perfect assets.'

CEE property investment volumes topped EUR 11 bn last year, making it one of the top three years on record but volumes are starting to slide. CBRE's preliminary data released this week indicate about EUR 800 mln of transactions were recorded in CEE during the first quarter of this year, compared to more than EUR 2.5 bn in the first quarter of 2011. A volume of more than EUR 3 bn was recorded for the last three months of 2011, which was slightly down on the volumes for Q3.

Ridder cited the examples of two properties that had been acquired years before by international buyers after the usual due diligence. This time around planned re-sales of the properties did not go ahead because of legal issues. ‘Presumably the same issues were noted the last time but were not thought to be dramatic. Today, any tiny imperfections are deal breakers.’

Martin Erbe, head of CEE at German lender Helaba, said scarcity of bank lending had caused the closing period for deals to increase from 1-2 months at the peak of the market to anywhere between four and nine months today.

'In some markets to get EUR 60-80 mln financing you need a consortium of up to five banks because the appetite has become much smaller. For individual banks still interested in real estate the appetite is EUR 20-25 mln per deal,' Erbe said.