According to the panellists of the investment panel at CEE Property Forum 2019, sellers have become more cautious compared to last year when they thought the market was reaching the peak and they were going to get the best price possible. Prices, however, have gone up significantly in the last 12 months as the general lack of quality investment products persists in the region.
Looking ahead, Richard Wilkinson (CTP) believes that interest rates are not going down anytime soon, prices are going to go up and yields are going to go down. This, of course, means that sellers are not very keen to sell these days.
According to Radu Boitan FRICS (Revetas Capital), investment opportunities are becoming scarce even in secondary markets. Finding value is becoming harder as there is a spillover effect from core markets that is compressing yields even for secondary assets. Investors shouldn’t forget, however, that markets within the CEE region are very different. In some markets, such as Prague, you can successfully invest in repositionings but in others, like Bratislava or Polish cities, you can’t play this game very well, he added.
Story of the year: Asian capital in CEE
Asian investors have increased their presence in the region during the past year and according to Luke Dawson (Colliers International) they will become even more dominant players in 2020. Not only South Korean capital is active in CEE, investors from other countries such as the Philippines Singapore or Malaysia are also investing in the region. Certain Chinese investors have also transacted in CEE during the last 18 months but they are being selective and quiet about what they do. They are focused on infrastructure, logistics, manufacturing and land, they are not going after trophy assets, he added.
Staying clear of retail
Investor preferences have shifted noticeably during the past two years. Most investors stay clear of retail due to its bad perception, even though there is still value in the right asset in the right location, according to Mike Atwell (JLL). Office and industrial remain the most popular asset classes but investors have also started looking at residential assets. Besides some funds buying portfolios of apartments for rent, Tomáš Běhounek (bnt attorneys in CEE) is also seeing local and international funds in the Czech Republic investing in residential by financing new developments.
Watching out for economic and political risks
One of the potential risks for CEE is the potential effect of an economic slowdown in Germany. According to Radu Boitan FRICS (Revetas Capital), CEE economies are much stronger and diverse than they were a couple of years ago. Still, the region’s dependence on the automotive industry is still an issue.
A bigger risk is the rise of populism in the region which presents the possibility of a trade war or an actual war, Richard Wilkinson (CTP) added.