PwC: CEE Real Estate Sector In For Difficult Year, Romanian Mkt Begins To Thaw

The region as a whole was confronted with a flight of foreign capital and investment is likely to remain low for some time. However, three markets in the region, Poland, the Czech Republic and Turkey, have proven to be very resilient in the current economic environment, PwC said in a press release Thursday citing findings of the study Emerging Trends in Real Estate Europe 2010, published by the Urban Land Institute (ULI) and PricewaterhouseCoopers.

"Elsewhere in the region though, the real-estate sector was hard hit with property values and occupancy rates falling fast. That is also the case of Romania, which saw a decline in real-estate prices and transactions and the local market is only now beginning to experience a thaw", said Brian Arnold, Tax and Legal Services Partner with PricewaterhouseCoopers Romania.

The seventh annual report Emerging Trends in Real Estate Europe is based on surveys and interviews with well over 600 of the industry's leading authorities, including investors, developers, financiers, and property managers. Overwhelmingly, respondents cite the need to move forward cautiously, as Europe's economy remains fragile due to high unemployment and low consumer spending, PwC said.

"Central and Eastern Europe's real estate sector faces another difficult year in 2010, but prospects for the future are brighter. With some credit easing and property values stabilizing, Europe's real estate industry will see some improvement in 2010, but still faces a 'long, slow haul' to recovery," the report notes.

Additionally, the report notes the looming problem of massive refinancing of real estate debt totaling hundreds of billions worth of euros.

"The industry is apprehensive as it is not clear how this will play out, in terms of whether financial institutions will sell real estate assets and loans or 'extend and pretend.' This challenge for the real estate sector is compounded by uncertainty over how, and when, European governments might wean their respective economies off the massive injections of state support. An abrupt withdrawal of the stimulus funds could derail the recovery, and even push the economy back into recession," the report notes.

In terms of individual cities, Munich and Hamburg were ranked by the report as the top two prospects in 2010 for existing portfolios, a ranking they also held in 2009. Paris was ranked third by Emerging Trends in terms of prospects for existing portfolios, edging out London due in part to the general perception that it has a wider economic base and is less dependent than London on the financial services sector. Interviewees pointed to the low level of vacancies in Paris, raising its ratings for investment opportunities and, to a lesser extent, for development.

Romania's capital Bucharest was not included in the ranking that analyzes 29 markets in Europe.

Additional markets rounding out the top ten named by Emerging Trends for existing property performance prospects are Vienna, Milan, Istanbul, Berlin, Rome and Frankfurt.

The report's respondents also provided a series of tips for the real estate industry. Respondents recommend sticking to investments in large, liquid markets, and investors with the stomach for risk are advised to buy land and start building up a pipeline of projects, as residential and mixed-use are the best sectors.

Respondents also said the time is right for buying a bank or setting up a lending platform, saying now is a great time to lend on real estate.

If you liked this story, please follow MEDIAFAX.RO on FACEBOOK »

The content of mediafax.ro is for your information only. Republishing or using this content is forbidden without express consent of MEDIAFAX. For this consent, please ask for it by mail at vanzari@mediafax.ro.