KPMG survey: Property financing for CEE remains unclear

The financing of Central and Eastern European real estate remains unclear, due to a large reduction in transactions, as well as the variable performance of real estate according to country and asset class, a survey suggests. According to KPMG’s new CEE Property Lending Barometer 2010, banks are not positive about the potential quick recovery of the real estate market in any country. The only possible exceptions are Poland and the Czech Republic, where, comparatively, the markets have not suffered from the recession to the same extent as in other countries.

The survey was conducted among leading banks in the region to assess the prospects for bank financing in the CEE real estate sector.“Before the recession, investors viewed individual countries within CEE more as part of one region,” said Andrea Sartori, partner, and head of real estate, leisure and tourism in CEE at KPMG. “In reaction to the downturn, investors are increasingly looking at each country and its economy individually. This divergence and a search for quality assets have produced a mixed picture in the region.”

According to Sartori, the more mature markets of Poland and the Czech Republic have thawed out more than other countries in the region during 2010, as investors focus on better performing economies. Ori Efraim, partner of KPMG in Romania and head of real estate, added that it was “hard to talk about the CEE region as one unit. In the recession, the countries whose real estate sectors have suffered the most are those which saw a lot of speculative investment up until 2008, as was the case in Romania. But Romania has a lot of potential in the long term, and prospects are good for sustained growth in 2011. This is bound to have a positive effect on the real estate sector as confidence returns.”

Sartori continued, “While debt financing is still problematic for many developers, the liquidation of large numbers of asset portfolios has not taken place. Although the markets and confidence have risen during 2010, the state of the economy in the USA and the Eurozone has led to a debate regarding the likelihood of a double dip recession. Before 2008, we had seen huge increases in supply to cater for high demand. Today, fewer projects are being launched mainly due to the lack of development finance.”