European property developers face the dual challenges of the spiralling cost of raw materials and much tougher lending conditions. The cost of financing has risen massively since the start of the credit crisis and could endanger real estate development projects, according Ed Nozeman, professor of real estate development at the University of Groningen and the Amsterdam School of Real Estate.
European property developers face the dual challenges of the spiralling cost of raw materials and much tougher lending conditions. The cost of financing has risen massively since the start of the credit crisis and could endanger real estate development projects, according Ed Nozeman, professor of real estate development at the University of Groningen and the Amsterdam School of Real Estate.
'Financing is more difficult as capital isn't readily available and capital won't be available as the banks have become more cautious,' Nozeman said during recent event in Brussels to mark the 50th anniversary of the founding of the European Union of Developers and House Builders (UEPC). The situation is being aggravated, he said, by staggering increases in the costs of building materials.' All kinds of materials have seen double-digit increases in the last 18 months to two years.'
The UEPC conference was hosted by the real estate unit of KBC Bank. UEPC has national affiliates in 12 countries, representing more than 30,000 developing and house building companies. Taken together, the companies annually build and develop around 1 million new homes and several millions m2 of offices and shopping centres.
In his keynote presentation 'Real Estate Development in Europe: a challenging Europe?' Nozeman stressed that the question mark in title was not an expression of doubt about the prospects for the industry. In his presentation which explored the demographic and economic perspectives for the Continent, and the roles of public bodies and private companies, the professor said the prospects for developers were fascinating but the challenges would be different from those of the recent past. Rising costs and more restrictive bank lending are now two of the main challenges.
Nozeman emphasised, nevertheless, that the cyclical nature of real estate had not and would not change. In addition, companies could find success in either mainstream or substream developments, and no one development companies would remain in the number one position indefinitely.
