Erste expects prices of properties in Central and Eastern Europe to increase

A study by Erste Bank states that there is an extremely high chance of the price of properties in Eastern and Central Europe entering a period of sustained increase. This evolution will be clearly determined by the contraction of yields, said Günther Artner, Co-Director CEE Equity Research, who added: "Given the high vacancy rates in the region and the completion of several real estate projects, it is unrealistic to expect an increase in the value of properties due to a rise in rent prices before the next 4-6 quarters".

The turnover of the European real estate market increased almost 70% YOY, to 43.8 billion Euros in the first semester of 2010. The British, German and French markets accounted for 62% of the total volume of transactions. These countries also saw an increase in the number of major transactions (over 100 million Euros).

In terms of the categories of assets, office spaces accounted for 55% of the general volume in Austria, and 45% in the ECE region, Poland Russia and Czech Republic accounting for 97% of the latter figure, followed by Bulgaria and Romania.

The economic recovery is beginning to have a positive effect on the rentals of office spaces, which grew 38% YOY in H1 2010 due to the increased demand in the Western, Central and Eastern Regions of Europe. The office segment building has seen rent prices stabilize again, and some major cities have even seen higher rents for the quarter.

In the first semester of 2010, the retail sales in the EU27 area, hovered around last year"s numbers. Hungary, Poland, Romania and Russia received the bulk of investments. Investments in the European commercial property sector more than doubled in the first semester of 2010, compared to last year"s similar period, reaching 10.6 billion Euros. Commercial centers remain the most attractive segment. "Under the current environment, the stronger companies will most likely invest in new commercial spaces and may buy out the weaker players, Erste specialists said.