Is the lockdown completely rewriting CEE's risk map? How does COVID-19 affect real estate financing? How can I close an ongoing transaction without travelling? These and similar questions were discussed by the experts at Property Forum’s latest online investment panel.
There is no doubt that the current epidemic has hit countries unprepared. However, it can provide a lot of information to look at the recovery process of China’s economy after the downturn. Investment has recovered quickly, which can also be encouraging for the European investment market. Real estate seems to remain an attractive investment asset. As an example, the house price index in Germany is at an all-time high rate and there is no sign of a decline yet, Vladimír Vaňo, Chief Economist at Mazars explained in his macroeconomic presentation.
According to Kevin Turpin, Regional Director of Research | CEE at Colliers International, regional investments have not fallen significantly in the first quarter of 2020. In the past year, the proportion of Asian investors has strengthened a lot, mainly at the expense of investors from the US and South Africa. While Western Europe is still interested in the region, in Hungary, for example, the proportion of domestic investors are extremely high as well as in the Czech Republic.
Investment yields between 2017 and 2019 have decreased in almost every sector of every country, with an exception of the Romanian office market and the Bulgarian logistics market, he added.
According to Richard Wilkinson, Group CFO at CTP, the residential market will suffer the most from the crisis. When it comes to bank financing, it can be seen that they continue to finance existing customers. The reopening of the economies will take at least another 12 months and until travel is not allowed, it will be difficult to conduct a transaction in the same way as before, he added.
In the current situation, it is not easy to complete a transaction, affirmed Ulf Pleschiutschnig, Managing Director of Morgan Stanley Real Estate Investment. The focus is on more well-established locations, which are the Hungarian and Czech markets in a Central and Eastern European context. A big segment of Morgan Stanley’s investment portfolio, about 10-20 percent, is located in these two countries. Real estate as an asset class will probably not be as big a loser of the crisis as in 2008, he added.
There is a high activity in deals, including large shopping malls and even hotels in Germany, the Czech Republic and Poland, although these are not transactions that have just begun, argued Jean-Bernard Wurm, Co-Founder & Managing Director at Secure Legal Title. The risk now is the lack of access to the property due to the restrictions.
Although a few transactions have been abandoned and people are now more cautious, in Slovakia, for example, several logistics transactions have been closed. Currently, the cheap Czech koruna is attractive to many foreign investors, but in the longer term, regional currencies may strengthen slightly, pointed out Marcel Kolesar MRICS, Transaction Manager, REICO.
Currently, there is an increase in yields in the Czech Republic, while the riskiest assets right now are shopping centres. Large retail chains that have stopped paying rent might set precedent for smaller tenants which is a serious issue for landlords, said Bryan Wilson, Partner, Wilsons.
As online shopping is in the process of development and more people are recognizing its advantages, the rethinking of the future of retail and its financing is crucial, stressed Martin Erbe, Head of International Real Estate Finance at Continental Europe, Helaba.
