The share of investment in Central and Eastern Europe (in particular in Poland, the Czech Republic, Slovakia, Hungary, Romania and Bulgaria), which is financed by local or neighboring countries, jumped 32% in 2017.
The data also show that transactions coming from neighboring countries have increased more than three times and already reach 7 percent of the region's 13.1 billion euro.
According to regional specialists, local investors have stepped up quickly and this has contributed to mitigating the effect of last year's decline in investment volumes generated by South African and Asian funds against a background of 2016.
It is possible that in 2018 South African companies will continue to withdraw, at the expense of increasing the activity of Asians, who are likely to trade in real estate portfolios or mergers and takeovers.
Brokers say that the future growth of local investment will depend on the attractiveness of local assets and the opportunities for access to them. The company believes that the return on first-class assets in capitals is attractive, mostly in comparison with government bonds, and with the exception of Prague and Bucharest, similar to securities dividends.
Studies also show that the stocks of selected public companies investing in real estate currently have a yield of close to 4%.
In 2017 there was a decrease in the volumes of Asian and South African funds compared to the previous year, which was record. At the same time, however, healthy levels of 1.4 billion for the Asian and 1.8 billion for the South African funds are maintained.
The third source of capital in 2016, the Central Eastern European region itself, has the most impressive results last year - 32% growth, contributing to a total of 3.3bn (local and cross-border investment) Euro.
Realtors highlight that cross-border investments reach their highest values - 7% of total investment in the region. The total volume for the six countries surveyed reached 13.1 billion euros. It exceeds the previous record of 13 billion euros in 2007.
EUR 220 million is the net cash flow in Central and Eastern Europe in 2017. This is due to a 32% jump in regional buyer activity. The decline in sales of EUR 1.2 billion was also contributed by regional investors and construction companies. Analyzes indicate that data show recent activity in investment purchases by South African and Asian funds.
An interesting trend is observed in 2017. After the US was a major buyer of commercial real estate in Central and Eastern Europe in 2014-2015, last year they became a net seller of 2 billion euros worth of property. In turn, Europe and the UK in particular have kept the trend of net sales in 2017.
The rise of local investors in the long run is positive for the real estate investment market in Poland, the Czech Republic, Slovakia, Hungary, Romania and Bulgaria. Key factors for this are the stability of investors and the fact that they know in-depth the local situation.
The volumes realized by local investors in 2017 are the highest in Poland, where they reach 421 million. Hungary ranks second with EUR 708 million. Bulgaria is the third with its 110m euros, followed by Romania with 35m euros.
For its part, the Czech Republic has a significant lead with purchases worth 1.08 billion euros, or 29% of the total volume of the country. The share of Hungary is 39% and that of Poland - 8%.
According to experts, the Czech investors contributed almost one in every 7 euros from the total investments (13.5% market share) in the six CEE countries last year. This is the second largest share of state investment in the world after South Africa. The total investment volume of 1.77 billion euros marks an annual growth of 43%.
Cross-border cash flows increased to € 691 million from € 84 million in the previous year. Free money coupled with the presence of highly liquid assets in the surveyed countries motivated Czech investment funds to make purchases both in the capitals of Central and Eastern European countries and in regional cities, especially in Poland.
Slovakia is the other country that has great merit in the amount of cross-border investments in 2016. Cross-border purchases totaled EUR 141 million and exceeded the local population more than three times.
Will local investment increase?
Experts say there is room for increased investment by local companies if they look at their overall GDP. Capitalization of investment opportunities in capitals and major cities is at reasonable levels, between 7% and 19% of local GDP. There is a strong likelihood of further growth in 2018-2019 as a result of the opportunities created by nominal GDP growth in the region.
At the same time, there is a chance to keep the high ratio of investments to GDP, which in four of the countries - Bulgaria, the Czech Republic, Hungary and Poland was between 1 and 1.8 per cent in 2017
Bulgaria is the most liquid market in terms of its size for the period. Investments from local companies in the country form one-sixth of the total market capitalization of the commercial real estate market in Sofia.
Hungary and Slovakia have the most advanced market access opportunities for end-investors. There are a large number of local mutual funds investing in business properties. However, such funds are missing on the two largest markets in the region, namely Poland and Romania.