It is a good time to put your money into capital and major cities in Eastern European nations, says a new study from Savills (www.savills.co.uk).
It found that long term sustained demand for new homes in Central and Eastern Europe due to rapidly rising incomes, growing urban populations and growth in the mortgage markets means principal cities in Bulgaria, Poland and Romania are providing the main focus for investment opportunities.
Progress in bank reform in these emerging economies has spurred lending, according to Savills research department. Between 2000 and 2005, credit to the private sector increased by 70%, with private households being the biggest beneficiaries. Mortgage debt accounts for 5.2% of GDP.
Western banks that have recently entered these mortgage markets predict 30% growth per annum over the next three years, with Romania the main growth driver.
There are good prospects for long term investment through the emerging middle-classes who want decent mid-market homes to rent, says Rebecca Gill, part of Savills residential research team. Values in more mature countries like the Czech Republic and Hungary have gone up already over the last five years.
Henry Wilkes, Savills director for Central and Eastern European Residential Investment says, We anticipate that price growth will be more muted in prime city locations as new build supply increases and markets correct themselves. Provision of new homes aimed at the middle income bracket will be vital, meaning prospects for development profits are strong for the foreseeable future.
Louis Mann, sales director for international investment property agency Validus Investment (020 7517 0580, www.validus-invest.com), is selling homes from £52,826 at Stefanesti Village on the outskirts of Bucharest in Romania.
He believes that with many people moving in from the countryside and people demanding a higher calibre of property unlike down-at-heel Communist blocks, investment prospects are strong.
Rather than buying in holiday spots where mainly other foreigners are investing, there is longer term potential purchasing homes in major cities where there will be demand from the local market, Mr Mann says.
Adding to the property shortage is a Communist bloc mindset where local government officers are incredibly slow at getting schemes through the planning process, which pushes up prices, adds Mr Mann.