Are CEE Markets being hit by the Credit Crunch???

Hi,

I would like to know if CEE markets are being hit by the credit crunch in the way that the Western markets are?

With the US, UK, Spain, Ireland etc being badly hit, is there any evidence on the ground that CEE markets are going the same way?

Obviously debt in CEE markets is lower but how much do Irish & British buyers affect these markets? I can see overseas investment falling in CEE with the low pound and slowing Irish market.

Are CEE markets still rising at 20%+ per annum? Surely growth must be slowing???

I would appreciate comment from people who live in Poland, Czech, Slovakia, etc and can give first hand evidence of the way these markets are moving.

Cheers.

Here in Romania there is very little evidence IMHO that things have slowed down. There was a bit of a wobble at the start of the year (or so I heard anecdotally) but things are booming again. A slight slow down in Mall construction and residential I would say. A few developers and agents (probably for their own vested interests) are touting commercial as the next boom sector.

Land prices are still forging ahead strongly. I can see that in agricultural land that I'm buying and have had one site I bought a little under a year ago valued 2 weeks ago by BCR bank at more than twice what I paid. That, of course, doesn't mean that there would be a swarm of buyers necessarily, if i chose to sell, but it points to the market continuing to rise.

ringledman said:

Are CEE markets still rising at 20%+ per annum? Surely growth must be slowing???

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Growth of 20% per annum is unsustainable and almost always followed by a period of correction/minimal growth.

To answer your query though, I don't think that the credit crunch is hugely affecting things in CEE. It's a little more difficult to meet loan criteria but as banks are developing their mortgage products, this seems to be counter-balancing any tightening. For example, in Hungary, it's now possible for even a brand new Hungarian company to get up to 75% LTV mortgages on classic property - something which was not possible even a few months ago.

in Poland the prices have levelled off.
we were looking at refinancing a private purchase and using our Warsaw flat as collateral. WBK were not interested in the fact that we owned property elsewhere in Poland, they were only interested in whether we could make the monthly repayments. a refreshing change from the UK where you can arrange a loan in principle in five minutes over the phone.

Buy to let mortgages do not exist in Poland, neither do self-declaration mortgages so the chances of suckering in a bank to lend you the money is pretty unlikely

we are currently being bombarded by Brits wanting to buy property in Poland though which might simply be a reflection of the hopelessness of the UK market.

I suspect that some of the smaller developers will go bankrupt this year through a combination of not being able to secure finance due to their poor pedigree (ie they produced welly boots until two years ago when they started to develop property - don't laugh it is true) and because of dumb locations (river floodplains and coal tips) and designs coming from the lego school of architecture.

reports from DTZ suggest that the Polish economy is going to expand considerably in the next ten years which is comforting

if there will be a short term correction it will probably be in places that have seen a lot of foreign investment in the residential market - read Krakow, Gdansk and Wroclaw

All of the above seem to have vestive interest in Romania,Hungary and Poland etc.

If you think that these markets wont be effected you would lack an understanding of how a credit crunch manifests itself and trickles down to the punters.

All I will say is if Banks are not lending in developed economies either to each other and thus to borrowers then they certainly wont take the chance in a development market, to their bank and citizens. Those countries mentioned above will feel their squeeze and this squeeze will be alot more telling there when it does.

I most certainly have a vested interest in Romania. It's where I live, where I'm raising my family, where I own businesses and property. The place is booming like it or not.

This morning I'm travelling to a Bank seminar in Cluj Napoca about EU structural funds. Unlike in Ireland at present, the Romanian banking system is crying out to lend especially where structural funds are available. I can apply for up to 70% funding for equipment for a business I'm opening which will employ 12 people immediately and a further 12 within 18 months.

Now I'm neither an economist or an accountant but as I see it structural funds increase employment and competitiveness thus boosting the economy and creating wealth which can be reinvested or leveraged.

As a nation becomes more wealthy more and more of it's citizens can afford to approach the bank for credit. The banks are more likely to lend in a rising economy like Romanias (especially with the vast amounts of EU money sloshing around in the system not to mention massive FDI) than they are in an economy which has reached the end of a cycle and is slowing down, shedding jobs etc. such as Irelands.

Business confidence is high in Romania, the banks are open for business and the place is hopping. That's the reality here on the ground and no one in Ireland can tell me otherwise.

Ceatharlach said:

All of the above seem to have vestive interest in Romania,Hungary and Poland etc.

If you think that these markets wont be effected you would lack an understanding of how a credit crunch manifests itself and trickles down to the punters.

All I will say is if Banks are not lending in developed economies either to each other and thus to borrowers then they certainly wont take the chance in a development market, to their bank and citizens. Those countries mentioned above will feel their squeeze and this squeeze will be alot more telling there when it does.

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a valid point, perhaps and indeed the cost of borrowing is more expensive in Poland than it was a year ago due to an increase in the LIBOR, but would you like to comment as to why the banks continue to lend to countries that are currently awash with EU funding? I do not pretend to be a full-time economist but the banks employ quite a lot of them I hear.

I don't think that having a vested interest is all that relevant if factual information is given.

Speaking for Hungary specifically, lending criteria have tightened over the last year. CIB, the second largest bank, seems to have clamped down significantly, particularly in relation to giving mortgages to foreigners. In contrast and possibly in reaction to this, smaller banks have developed their products and are now lending much higher LTV mortgages than before. The net result is that, if you know where to look, it is now undoubtedly easier to get a higher LTV mortgage in HU than it was a year ago. This is the current situation here. It could all change in the morning, of course.

If banks lending policies are tightening worldwide due to a credit crunch, its madness to assume that CEE is immune. Ireland was awash with structural funds for the 1970s & 1980s but that didn't stop the country from falling into a long and severe recession.

I have a vested interest in Belgium / Poland / Ireland property wise.

Recently i closed on a property in Belgium and was able to secure fantastic lending rates etc.

The bust scenario may be present in Ireland at the moment but where banks see reliably assets to mortgage against they are having no issue in lending.

To this end lending has not been effected in Belgium.

In Poland banks see growth and have no issue lending as yet when the banks see an issue with the growth yes they will shut up shop but not yet.

Economics are sound in Poland and if you look at Zloty appreciation that tells only one story.

Asked if id be interested in dipping in again, i would but only if i could get 10% yield and if not i wont, i find it difficult to find 10% yield in Warsaw but have no problem going to any country for 10% yield.

Its a matter of interest. Sideline what are yields in Romania?

As in any market yields in Romania are dictated by what you've stuck your money in. Buy badly and they could be negative, no problem at all. Buy well and you'll do well.

Foreign investors coming to Romania, and I mean serious investors, not the "buy an apartment with a 3-year-12%-nailed-on- rental-yield-variety" will find that they have as much to do in Romania to put flesh on their proposal for the bank as they would have to do in Ireland, perhaps more.

What they will find to their advantage is that their are oooooodddles of structural funds available if they know how to access them, that the banks are lending off the back of these funds and that the Romanian state is offering subsidised lending to investors (even on land purchases for crying out loud!!) if you know how to access them.

You didnt answer question attainable yield?

Muppets who go for guaranteed yield are just muppets.

Whats attainable yield im guessing 6-7????

I think we're talking a cross-purposes here. There is no such thing as an average yield. That's the proverbial "how long is a piece of string" discussion.

Anyway to get back to the original question of whether the credit crunch was/is affecting CEE markets then the answer is, largely,"NO!" in Romania. If it is affecting the country then I am failing to see any evidence of it in my discussions with the financial institutions with whom I deal.