Real Estate expansion in Eastern European Countries

The borders of the European Union enlarged including the following Eastern Europe countries as of May 1: the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, the Slovak Republic and Slovenia. These Eastern Europe countries can truly be described as emerging markets in the property field, not because property prices have not already been moving, but because the profound changes that are in train imply that there may be a lot more to come in terms of price development.

Since the fall of communism in Eastern Europe there have been big changes: in political relations, business patterns and in our attitutes towards the area. Investors from the Western World see big opportunities in the region.At the same tmie, the accession countries are looking to attract inward investment to develop their economies, and are seeking funds to improve the infrastructure and finance regional development. Even before these countries entered the EU it was predicted that EU accession would lead to a boom in the real estate market: increased occupier demand, rising rents, and a flood of investors keen to secure a footing in these countries. For Poland, Hungary, Czech Republic and Slovakia witnessed a number of changes brought about by the prospect of EU entry. Prague and Budapest have an increase in demand for office space from occupiers who are relocating certain functions out of Western Europe into Central Europe. Slovakia has now become a hot spot for the logistic and light manufacturing sectors, with a number of operators and companies looking to acquire new facilities to take advantage of the very central location and cheaper labor cost. Warsaw is witnessing a change from being a dollar denominated market to a euro denominated market.

Real estate market players are rapidly adjusting to EU standards. Well-established companies, developers and property owners are all agreed that accession bring them both opportunities and challanges. This is just the beginning of the road. If we take the example of former accession countries such as Spain and Portugal, their GDP increase was low in the short term but after five years it increased rapidly. The general proposition is that property prices in the new entrant countries can be expected to rise in the future years as a result of the foreign direct investment which will be stimulated. Commercial property demand will increase first; an increase in residential house prices will follow.