KPMG conducted the survey amongst over 50 leading banks in the region, to assess the prospects for bank financing in the CEE real estate sector.
As a conclusion of our survey, KPMG prepared an index – the Property Finance Sentiment Index – to depict how positively banks approach financing real estate projects in each country covered by this survey.
In 2010, when Austria was not included, the ranking was led by Poland, followed by the Czech Republic and Slovakia. The Baltics were on the 6th spot.
“The sentiment in the Baltics appears to be recovering more slowly than in other parts of our region. This is likely a reflection of the higher proportion of loans in various states of impairment, leading to caution on the part of the banks and also the very depressed real estate valuations which make any new development project very difficult to justify as a commercial proposition.” said Steve Austwick, Tax Partner and Head of Real Estate Sector for KPMG in the Baltics.
Steve continues: “Compared to 2010, a greater number of banks in all countries believe that in the majority of cases, impaired loans may be managed successfully through restructuring. A primary precondition before any restructuring is the cooperative behavior of debtor companies’ management.”
Real estate projects are strategically important to banks as none of the survey participants in any country indicated they had significantly low importance. Overall, the financing of real estate in CEE has shown signs of improvement since last year, concentrated on income-generating prime assets in better performing countries. Poland stands out from the other countries in CEE, as banks are more open to finance new development projects than income-generating properties.
The majority of surveyed bank representatives were neither clearly open nor explicitly negative about financing real estate projects. However, their approach to providing financing for real estate development projects varies greatly across the region.
In terms of sector preferences, these are inconsistent and vary from country to country. In Bulgaria, Slovenia and the Baltic countries, the industrial/logistics sector is at the top of the priority list.
In overall the hotel sector remains the least preferred by banks in terms of financing, but again good projects can obtain reasonable terms for financing.
The barometer includes input from over 50 banks active in real estate in CEE. Mainly through in-depth interviews, representatives of leading financial institutions have provided their views on the key issues affecting property lending. The following countries were included in the KPMG survey: Austria, the Baltics, Bulgaria, the Czech Republic, Hungary, Poland, Romania, Serbia, Slovakia and Slovenia.
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