FT Warns Investors of Property Price Falls in E Europe and Med

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Re: FT Warns Investors of Price Falls in E Europe and Med

Anyone who has bought in Croatia can relax on this issue. The fact that there has been, for domestic folks, little mortgage access for locals, plus that there have been virtually no foreign mortgages available (ie banks Ireland won't give a mortgage or any decent credit for Croatian property) insulates the market here.
 
Re: FT Warns Investors of Price Falls in E Europe and Med

Surely, if the locals in Croatia cannot access mortgages easily and if foreign banks are unwilling to give mortgages on Croatian property this will mean that the market will be limited by these factors. This could mean that the second-hand market may be virtually non-existent, unless you sell to another "investor" from Ireland, England or Germany.



Builders have built too many properties in many of these areas because of the demand from foreign investors but the locals in many of these E European countries cannot afford to buy these properties. The fundamentals in these markets are not very clear and it is not a certainty that you can make gains. Some Western investors may have been remortgaging properties in the West in order to buy E European properties and they will now be begininning to find it a bit more difficult with increasing interest rates and banks strengthening their lending criteria.

If the locals cannot afford to buy these properties and the only people who can afford them are other Western "investors" then this indicates that prices are out of touch with the economic realities of the countries involved. That coupled with an oversupply indicates that the only way to sell many of these will have to be to reduce the price.
 
Re: FT Warns Investors of Price Falls in E Europe and Med

Sorry, should have put in "until very recently" in terms of locals getting greater access to mortgages, which they are beginning to do so now. Along with a decrese in unemployment levels (esp in certain revioulsy difficult areas) ther eis a greater number of locals buying new builds - especially in the affordable sector, thus pushing locals already owning to buy further up the food chain.

Nowhere is perfect, but I left it a note from comparisons.

Steve D said:
Surely, if the locals in Croatia cannot access mortgages easily and if foreign banks are unwilling to give mortgages on Croatian property this will mean that the market will be limited by these factors. This could mean that the second-hand market may be virtually non-existent, unless you sell to another "investor" from Ireland, England or Germany.



Builders have built too many properties in many of these areas because of the demand from foreign investors but the locals in many of these E European countries cannot afford to buy these properties. The fundamentals in these markets are not very clear and it is not a certainty that you can make gains. Some Western investors may have been remortgaging properties in the West in order to buy E European properties and they will now be begininning to find it a bit more difficult with increasing interest rates and banks strengthening their lending criteria.

If the locals cannot afford to buy these properties and the only people who can afford them are other Western "investors" then this indicates that prices are out of touch with the economic realities of the countries involved. That coupled with an oversupply indicates that the only way to sell many of these will have to be to reduce the price.
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Has there been a recent restriction of foreigners buying property in Croatian 'National Park' areas? - with many areas becoming National Parks, such as some of the Islands.
 
Prices are bound to fall in the med and eastern europe where the markets are heavily reliant on UK & Irish investors.

These are the beach/ski resorts of Spain, Cyprus, Bulgaria, etc.

As property prices fall at home and mortgages rise people looking to buy in these places will be unable to do so, hence prices will fall.

Properties with local markets in eastern europe are unlikely to fall. These include the cities such as Warsaw, Prague, etc. The reason being that the local market drives these markets. Locals here are not as indeted as us in the West. They have a lot of equity following the giving of their homes after communism and therefore can take on small mortgages to fund the buying of a new build.

Simple really.
 
Gotta hand it to you Ringledman, you appear to be the David McWilliams of overseas property.
 
The government restrict the sale of any land in national parks, and even close by, even for locals. However, it is possible to buy under dispensation, but in almost 5 years I've yet to hear a decent case of it.

The islands can be bought on long term leases, but this is tricky, well, in certain senses.

Steve makes a good point on the origination of buyers, though Germans, Austrians and Russians have bought in some spots (most notably Spain - just relating to the places he mentioned), I;m just wondering would this balance it out?

leghorn said:
Has there been a recent restriction of foreigners buying property in Croatian 'National Park' areas? - with many areas becoming National Parks, such as some of the Islands.
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ringledman said:
Properties with local markets in eastern europe are unlikely to fall. These include the cities such as Warsaw, Prague, etc. The reason being that the local market drives these markets. Locals here are not as indeted as us in the West
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Ringledman,

The average per capita income in Poland is just shy of $us10,000 per year - yes thats dollars. I know that the urban centres will be a bit higher but not considerable. With apartments typically in excess of €150k, there has to be a lot of FDI going on. I know of a reputable company in the West of Ireland operating in this market, saying there was a lot of half assed cowboys selling constantly to naive OPI's. Also people crab on about Berlin being dodgy, but their wages must be over twice as high. Poland has the second highest unemployement in Europe at 10.7% - hence so many coming to UK and Ireland and although GDP growth is expected to acheive 7% this year it is coming off a very low base. I think Poland may suffer and Warsaw maybe overdone. I do not see the fundamentals stacking to suggest otherwise. If you have property there good luck, I hope it was'nt recent. A lot of Irish investors bought in here through an AIB syndicate scheme - bank have a lot of expertise as they own a local bank. I believe the syndicate have made a real killing in the last 3 years or so. Past a 100% return (4/1 leveraged investment) on the orginal investment - I think? Good luck if you get it.
 
I think a lot of the apartments are being bought by polish expats in the UK and Ireland tbh. They are buying there in the hope that their economy will boom and they'll be able to rent it out or live in it upon return. This is what I get from speaking to poles here whom I work with.

They couldn't believe how cheap Berlin apartments were when I told them. Their exact words-"So cheap in Germany??!!". So even poles think Berlin is cheap, not that their economic geniuses but neither am I.

Berlin has a lot more beurocrats stuffed into it than Warsaw too. I doubt every nation on earth has an embassy in Warsaw but I'd say most have one in Berlin. European Patent Office is there too. These beaurocratic jobs transfered from Bonn (with some large ministries yet to move) bring top wages to Berlin. What does a polish civil servant earn?

I really can't believe a more expensive flat in Warsaw is better value long term.
 
think you'll find that the official Polish Office of Statisitics shows a 3.8% unemployment rate in Warsaw.

[broken link removed]

Think this compares pretty well to Berlin which I reckon is around 10-15% unemployement.

Also I have no source but you will find a much large average wage in Warsaw than the rest of the country which is skewed by the large number of poorer rural people.

Also in favour of Warsaw is its current small size in % terms of country population compared to all other European capitals. Add the huge influx of people moving in and the restrictive planning regulations (like the UK) and there is a huge demand-supply imbalance.

Some people talk of a doubling in Warsaw's size of the next 10-15 years as the nation moves from an agrarian to urbanised and capitalist society.

Make your own mind up on the place. I'm in it for the long haul. I bought a 1 bed flat last November for 328,000PLN its now around 445,000PLN (although no profit is made until you sell!). I think growth will slow to around 10-15% pa and the higher growth will come from the second and third tier cities.

Can you achieve such growth in Berlin? Not at the moment. Add in the fact that in Germany the max LTV you can get is 60% and in Poland it is now 90% and its clear that your ROI will be far greater in the later of the two.
 
And talking of FDI in Warsaw - View Pages 16-17 of the attached European Cities Monitor Report.



Showing the largest number of companies expecting to locate to Warsaw than any other European city over the next five years.

Page 18 makes some interesting reading of where Warsaw could be by 2012.
 
ringledman said:
Add the huge influx of people moving in and the restrictive planning regulations (like the UK) and there is a huge demand-supply imbalance.
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ringledman said:
Some people talk of a doubling in Warsaw's size of the next 10-15 years as the nation moves from an agrarian to urbanised and capitalist society.
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I'm seeing a contradiction here. I'm not out to pick holes-I hope your investment stays strong for you but if there's such tight planning and lack of accomodation, how can the city expand by 100%?
 
murphaph said:
I'm seeing a contradiction here. I'm not out to pick holes-I hope your investment stays strong for you but if there's such tight planning and lack of accomodation, how can the city expand by 100%?
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At present there is a large shortage of accomodation, without a doubt there is not enough to fill the demand of the people moving in.

This is probably why the place rose around 33% last year and this year I guess around 25% or above.

The current restrictive planning is keeping this demand very high. Warsaw has a lot of land so naturally in order to grow the city will have to release more land to do so. I don't think this will create a glut of properties as the increased demand will likely remain year on year.

Whether it will double I don't know. I do though think it represents a great long term investment. The Polish economy, educated & motivated workforce, high existing equity and high FDI all point to a city on the up.

If you look at the price to earnings alone it distorts the overall picture. London's average salary is tiny compared to its average house price. Probably be around 10-15 times.
 
Hungary is relatively safe from this subprime credit squeeze, - no bubble to burst, - one of the lowest average prices in EU and luckily for myself it seems Budapest is to boom post credit squeeze 2009 2010.

It is the primary reason I purchased in Hungary - isolation from the Western Debt ridden economies - away from the international property development marketing machines.

However this is likely to change as the public deficit is trimmed and as big developers from Spain and Israil move in.

I think I purchased at just the right time ....... time to refinance and buy again.

Another factor of note ..... more and more TV shows are being filmed in Budapest - most recently aired "Painkiller Jane" where 4 or 5 episodes where set in Budapest. Budapest profile is becoming more and more prevelant through marketing whether it be via new Ryan Air routes from East midlands airport or the yet to air Michael Palins New EU road trip to Hungary - Sun 7th October, I have no doubt that a place in the Sun will be revisiting Hungary soon.

Sometimes you just have to go with your gut instinct ...... and mine is telling me that its time for Hungary to play catch up to its neighbours, fueled by exports to China, Germany and Russia.

One place where mega corporations WONT cut back is Hungary - where wages are uber low and where they can make significant savings by investing.

Another factor is that the Credit squeeze will likely help to cut the dead wood bad development design projects ...... only developers of note will get finance and respect - thus planning permission.
 
MaxIII said:
One place where mega corporations WONT cut back is Hungary - where wages are uber low and where they can make significant savings by investing.

Another factor is that the Credit squeeze will likely help to cut the dead wood bad development design projects ...... only developers of note will get finance and respect - thus planning permission.
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I have a brother who is a corporate down sizer with a large multi national in Europe. Basically, he did himself out of a job in this market as everything was closed up. Now he is based with the same company in China and works across the Asia Rim and still closes facilities - Indonesia now to zero - generally no longer has same level of manufacturing compared to 5 years ago - salaries there are Uber Uber low. Whilst for somewhere educated like India, it is Uber Uber Uber low (especially 4 hours out of Mumbai or same for Shanghai). A facility can be closed anywhere in Europe and setup in full production 5000 miles away in less than 6 weeks. The cost of transport is so cheap now people from the Far East no longer ship but air Freight. League times of 6 days to the shop floor are the norm. Under new rules of globalization etc no country is certain of immunity. As far as the growth stories of Hungary and Poland etc I imagine their labor market are flexible (I don't know much about them) and are less rigid than Germany for instance. But I think one of the reasons for upswing in property growth there is quite a lot of FDI's and the country has never felt the chill of a capitalist recession or property adjustment. Germany, Japan etc have had bloody noses in the past and are reluctant to go down that avenue again at full steam.

"Baltic Tigers" are expected to grow as springboards into Europe but property is not keeping pace to growth, especially as said prev, 20%+ growths in two years whilst econmy growth 7%. Property there as mentioned not cheap. What is the resale market presently like in Budapest and Warsaw etc? MaxIII - Budapest has been floged to death by oversea companies in UK since 2001 - flogging to naive OPI's, why do you think it's immune. Google Budapest property ,to see how many are at it still. Good growth if invested in years ago, not so sure if it was a recent venture.
 
The information for this report was compiled in July'06. It would be interesting to see if there would be any adjustments now based on the global financial situation at present.

The only thing I feel sure of at present is that almost any country has a better chance of capital appreciation than Ireland/US/UK.

I also wonder if the Burmese situation will affect China. There are people saying that the Olympics should be witheld from China if they don't step in & help sort out the problems in Burma - they need to clean up their act in their own country too ! China's industries are booming but a lot of them are based on labour exploitation & total disregard for the environment.

You can do your due diligence etc but very few people forsaw this subprime crisis & how it would affect the global economy. For me the main thing with any investment property is that it will finance itself.
 
ringledman said:
think you'll find that the official Polish Office of Statisitics shows a 3.8% unemployment rate in Warsaw.

[broken link removed]

Also in favour of Warsaw is its current small size in % terms of country population compared to all other European capitals.
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If I am right greater Warsaw area has a poulation of 3.5 to 4.0 million whilst the total population is 34 million. Population growth from 2001 to 2007 has remained constant at 34 million. The city will swell a bit but is near the Euro norm of 3600 per square kilometre (London has the highest at 4,600). Can the city cope if many rural dwellers with less education decide to move to the urban centre?
 
Perhaps the very fact that poles are more than willing to up sticks and ship out to other countries to earn a living is a bad thing for a landlord!

Germans are more lethargic in this regard and will 'grin and bear it' at home to a much greater extent, thus providing tenants.
 
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