Meanwhile, transaction activity has occurred in countries with better macroeconomic performance (i.e. Poland and the Czech Republic) and which are geographically closer to the more mature markets of Western Europe. Overall, bank financing will play a vital role in the recovery and the development of the sector in the region, but general market conditions need to improve in CEE before the real estate sector can regain its footing.
The report - which has been prepared with the input of 35 banks active in real estate financing - offers essential insights into the following aspects of real estate lending in CEE:
- Regional overview of the CEE real estate market
- The current state and banks’ future expectations for impaired real estate loans
- The overall prospects for the banks’ real estate portfolios
- Assessment of the banks’ openness to finance real estate projects
- Opportunities for financing new real estate projects, including the banks’ asset class preferences, criteria for financing and the differences between new development and income-generating properties.
As Ori Efraim, Partner at KPMG in Romania comments: “This report gives valuable insights into the state of the real estate market in CEE by focusing on the critical issue of financing. There are quite significant differences across the region, but development in the real estate sector is closely linked to macroeconomic performance. Romania entered a technical recession at the start of 2012, so it is not surprising that the real estate sector remains sluggish. Moreover, Romanian banks are still preoccupied with managing a large non-performing loan portfolio. Only 44 per cent of loans are fully compliant, while 21 per cent are seriously impaired, one of the highest rates in the region. Part of the explanation for this lies in the very high proportion of foreign currency loans in the banks’ portfolio. 96 per cent of Romanian real estate loans are in foreign currency, more than in any other country in the survey. As the Romanian currency has depreciated some 30 per cent against the euro since the height of the property bubble in 2007-8, and even more against other currencies in which loans were then available, such as the Swiss franc, it is natural that many borrowers have got into difficulties with repayments. Any upturn in the Romanian real estate market depends on banks becoming more confident about lending, and this is unlikely until we see a clear upturn in the economy. To ensure greater stability in the future, both banks and borrowers should learn from the past and concentrate on the Romanian currency as the primary means of financing real estate purchases.”