CEE housing market in doldrums

2009-11-23



The residential real estate market in Central and Eastern Europe clearly stagnated in the first three quarters of 2009 as buy-sale transactions declined, analysts from the company REAS reckon.
The slump in sales was in great measure a consequence of the tougher credit policies imposed by banks, many of which have set very restrictive criteria for potential borrowers. This in turn has led to a drastic reduction in the number of mortgages being granted. Another factor driving down sales has been the economic crisis, which has placed constraints on household budgets. At first developers across the region reacted by moderately cutting their prices, and then later offering more drastic discounts. This downward trend has been least acute in Prague and Budapest, as a consequence of which the crisis is still going on as even customers with access to credit are refraining from buying properties which are still deemed to be too high.
One outcome of the slump in demand has been the emergence of a new phenomenon in Central and Eastern European countries, i.e. a large number of recently finished flats that remain unsold. This in turn has made investors reluctant to embark on new projects, a problem further compounded by the problem of obtaining financing for such investments. In the opinion of specialists, the situation will not change until developers manage to find buyers for unsold properties in their portfolios. For the time being they are focusing instead on accumulating financial resources for future investments, as well as on building up their land reserves.

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