'Hungarian, Romanian populism hamper investment'

Policies pursued by the Hungarian and Romanian governments - branded populist by critics - make it difficult for German Pfandbrief banks to provide real estate financing in those markets, according to Walter Hampel, managing director of CEE real estate finance at pbb Deutsche Pfandbriefbank.

A panellist at PropertyEU's second investment briefing on CEE real estate, Hampel said the countries in the region could be characterised as 'the good, the bad and the ugly'.

Poland and the Czech Republic are very liquid and make up the 'good'. Hampel said property debt is available in both markets 'for the right product and right leverage'.

The 'bad' countries for the bank, he said, are countries that may be profitable lending markets but are not in the European Union and therefore eligible for the Pfandbrief structure - Russia, Ukraine and most of the south eastern countries in the Balkans. Almost no German banks are active in these markets, and investors have to go to the large local banks in Russia or Austrian banks for the Balkans.

Hampel continued: 'The ugly ones are the countries like Romania and Hungary that make life difficult for themselves. In general a lending market must be possible, but politicians have decided it is more important to go after populist politics and win the next election rather than save the country, and this has consequences for a bank.'

Romania's government, led by Social Democrat Victor Ponta, has been criticised for vowing to reverse tough austerity measures. Hungarian leader Viktor Orbán has been chided by the European Union on a range of issues, including a media law as well as the nationalisation of pensions and moves to re-impose state control of utilities.

Hampel said the macroeconomic situation in the two countries was not bad and that Romania had taken steps in recent years to tackle its indebtedness and stabilise the economy. 'They have taken steps in the right direction. Unfortunately they have combined that with very populist politics, and in the case of Romania, even silly politics that are certainly not helpful for investor sentiment.'

Deutsche Pfandbriefbank has provided funding for US investor Heitman's investment in prime offices in Budapest and has funded deals in Spain but he said these were exceptions.

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