VIENNA/CEE - The impact of the subprime crisis on stock markets helped reduce overpricing and overheating in  the Central and Eastern European real estate markets, delegates at the Vienna Real have agreed.

Participants of various panel discussion during the real estate fair in Vienna named a dampening of expectations, an end to a too-rash development boom and adjustment of prices as major positive effects of the credit crisis.

"In fact, there is no crisis in Eastern Europe as the region is developing much better than any other in Europe," suggested Andreas Ridder, managing director of CB Richard Ellis in Vienna.

He admitted, however, there has been indirect impact of as a result of the subprime crisis seen mainly via the stock markets.

"Before the crisis we had the problem of too much supply as it was easy to finance projects and build them - while now the financing of projects is getting more and more difficult," Ridder explained.

Capital ressources will therefore be key to investments in the region over the coming years, as Barbara Knoflach, chief executive of SEB Asset Management in Germany, pointed out.

The Swedish bank subsidiary has been cautious so far about going into Eastern Europe as the company said it believed risk premiums were not being paid and the price level was "badly overheated - especially in Kiev", according to Knoflach.

"With the correction in the markets caused by the financial crisis, we will see market phases which might make it interesting to be invested in regions like the Ukraine in future - but it is too early as yet," she explained.

Financing investments should not be a problem, she hinted, as SEB has banking subsidiaries in the region.

"We are definitely looking at the countries which are preparing to join the eurozone," she told IPE. "But the 'classics', like Poland and the Czech Republic, are also becoming interesting again as price levels have been adjusted by up to 50bps."

A ‘normalisation' of prices and people's expectations is also one of the positive effects of the market crisis for Bernhard Mayer from the Europolis AG, a real estate division of the Volksbanken group which has a specific CEE focus.

"Until now, everybody who owned a piece of land or a property in the region could expect it to increase in value over the coming six months which made it sometimes difficult to close deals. Now we have seen a healing middle step, a pause which shows trees do not keep on growing endlessly," said Mayer.

Similarly, Karla Schestauber, senior real estate analyst at Bank Austria Corporate banking, said the crisis helped to "take exaggerations out of the markets in the region".

She expects markets to go back to "normal" by this time next year should the economies develop as forecasted. "But risk-loving investors can go into the markets now," she added.

Madlencnik stressed markets will not go back to the level they were at one year ago as they were "overheated", rather to levels seen 18 months or even two years ago.

As for the economic development in the markets, Ridder added the fundamental data is considered ok for the region with regards to both economic developments and demand for property.

Alexander Hodosi, equity analyst with Uni Credit CAIB, also agreed: "The region is healthy, the demand is healthy and there will be an increasing supply of properties - not least because of the high number of activities by Austrian real estate companies and the market should be ready to take the increase."

He added among European real estate investors Austrian companies have one of the highest equity ratios ranging between 50-75% compared to a range of 20-30% in Germany.

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