Record high investment volume expected for Hungary in 2017

The CBRE international survey reveals that after 2016, 2017 is also promising to be a strong year in the European real estate market; according to it, 85% of investors would spend at least the same amount as last year to purchase real estate, with the total amount reaching $475 billion globally. 

 

43% of the respondents at the event stated that the investment market might grow even by one-fifth from last year’s €1.5 billion, and 23% stated that this year they might reach their highest turnover ever. 

According to the survey CBRE expects the domination of domestic investors to continue this year, after their 35% share in last year’s turnover. Gábor Borbély, CBRE Head of Research and Consulting said that a decline in the presence of US investors is expected this year as the dominant overseas funds have over weighted their home investments, and are therefore planning less capital export. Thus, the local investment market can be increasingly dominated by traditional European investors, primarily by German open-ended funds, the national survey revealed. 

 

In contrast to the pan-European investment market where only one-third of investors named offices the primary target of capital, office buildings have an outstanding (69%) appeal among investors active in Hungary, followed by hotels (14%) retail (8%) and industrial real estate (8%).

 

Over the last few years the general compression of yields has urged real estate investors to find new alternative investment targets, such as student housing, theme parks, or even private educational or medical institutions. These types of transactions have not been closed in Hungary yet, but according to the industry players present at the CBRE Investment Breakfast, student housing (49%), housing loans (27%), and medical and educational buildings (20%) in Budapest can become attractive investment possibilities in the future.

The CBRE presentation revealed that the rising interest rates in America have already influenced European investors as they regard the possibility of a faster-than-expected European interest rate hike the biggest threat in the real estate market. However, the national survey’s relative majority (43%) is betting on a further yield compression over the next two years. In any case, it is a significant change that within a two-year horizon some yield increase is already projected by 16% as opposed to last year’s 0%. 

 

However, participants of the Investment Breakfast do not fear the contraction of the developments’ marketing possibilities yet, but for 56% the rising construction costs are causing a great concern. 35% of respondents trust that rents will rise and 38% expect further yield reduction, but according to 24% the current construction cost rally cannot be avoided without a profit decline.