As the economic outlook improves for CEE, real estate investors will change their perceptions about the political risk in the region, according to Arpad Torok, CEO of Budapest-based developer Trigranit.
It is no longer possible to single out Central Europe as a politically risky region, he told PropertyEU in an interview: 'Previously unthinkable events have taken place in the developed West too,' he pointed out in a recent interview, citing the example of the Brexit referendum result in the UK.
In any case, last year's active investor activity in CEE is a sign of trust, he said. 'If we look closer at Hungary, the country has high-quality assets and good tenants with good guarantees, these certainly help build trust. Commercial consumption is increasing and the economic indicators are strong. And investors have also been more positive regarding political risk. For the long run, however, it is important for the market to remain predictable – market-based regulations and decisions are necessary. Without that, international investors are going to turn their backs on Hungary.'
In that context, Poland also rates a mention, he said. 'The country is performing well but the government’s increasingly interventionist agenda could have a negative impact in the longer term,' he warned.
Local liquidity is key
Local liquidity is key to attracting significant numbers of investors, he said. If the domestic market is functioning properly, international investors have alternatives and that leads to greater stability in the long run. 'Local capital does not leave in the event of an economic or other crisis, as opposed to opportunist global investors, who can leave easily. Domestic liquidity is like an anchor.'
On that front, domestic capital is starting to gain momentum in the Czech Republic while Hungary is performing better and better as well. Since 2013, 27% of investment turnover in Hungary originated from domestic capital compared to 29% for Czech Republic, he pointed out. 'It is very interesting that there is no such phenomenon in Poland, but if REIT structures become more widespread, that could give the region’s largest market a boost.'
While Brexit has yet to eventuate, Torok does not see it having much of an impact on CEE. However, CEE could benefit from more consolidation of business process outsourcing (BPO) and shared services centres (SSC), he said. ‘The majority of the SSCs – or some 80,000 m2 - are already located in Krakow due to the city’s central location, the availability of universities and an educated workforce.’
The full interview will appear in the January edition of PropertyEU Magazine
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Outlook 2017: Europe & CEE
investment briefing
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19 January 2017
Colliers International, Warsaw
13:00 - 15:30
What are the prospects for Central and Eastern Europe? Will strong economic growth continue to attract international investors?
Join our time-efficient briefing, hear the insights of our panel of market experts and ask your own questions in our interactive discussion.
Attendance is complimentary but places are strictly limited.
Register now to reserve your place
