Eastern Europe: Is the City Centre Market Coming of Age?

Eastern Europe: Is the City Centre Market Coming of Age?

1 2220
Kiev

Some might ask if ‘coming of age’ was a good thing as far as property investors are concerned; the answer is probably ‘yes’. Ewan McGarrie of propertyinvestment.co.uk recently described the East European city centre market as ‘large and stable’ and particularly highlighted Budapest as a stable residential market with good capital appreciation prospects. Yesterday we juxtaposed the possibilities of much smaller Zagreb with Croatia’s Adriatic coastline and made the point that Zagreb, as the capital city, is drawing in the country’s professional ‘cadres’.

However, there is a bigger story to tell in the dynamic economic prospects of Eastern Europe, which have been largely overshadowed by commentators concentrating on the BRIC (Brazil, Russia, India, China) economies. Unlike Russia and China, East European businesses are well placed for attracting the profitable, well-paid (development and marketing) ends of the ‘smiley curve’ as well as the less remunerative manufacturing.

While cities such as Tallinn, Prague and Budapest have been well and truly discovered by property investors, this has different implications from one city to the next. Riga, for example is relatively small and, having enjoyed rocketing residential prices in the last couple of years, can probably only loose favour in the short term. Budapest is cheaper than any of the Baltic capitals but has a well-developed buy to let sector and has been seen as catching some of the success of Prague in attracting commerce and tourism.

However, there are many important cities in Eastern Europe for whose property sectors the ‘coming ageâ’ metaphor does not hold (yet) with investment opportunities at once being greater and riskier. Cities such as Sofia and Bucharest fall into this category and for the time being are probably safer investments than most of the tourist areas of Bulgaria and Romania. Just because locations haven’t enjoyed the limelight or, as in the case of Kiev, have had a definitely bad press recently, it doesn’t necessarily hold that property markets are undeveloped.

Kiev residential property prices have grown enormously in recent years as the construction industry fails to keep pace with the demand of Ukrainians to own their own homes or to be able to move out of Soviet era apartment blocks. Ukraine offers no restrictions on foreign ownership and no capital gains tax but investors may wish to see how the country’s dilemmas as a buffer state between the Russian Federation and NATO work out in the near term before committing themselves to Kiev property.

The Adam Smith Institute organises (annual) conferences on real estate investment in the Ukraine and the next one is scheduled for November. With suitable Kiev properties possibly beyond the reach of private investors in the short-term, the western Ukrainian cities of Lvov (Lviv) and Odessa may also be worth consideration though current infrastructure leaves room for improvement.

Whichever East European country you invest in, it seems best to target the non-discretionary spending of professionals seeking a home rather than the uncertainties of the holiday let market, especially as the future of cheap air travel seems to be more in question. We would like to hear from any site visitors who can give a vote of confidence in any particular city from personal experience. Soon, we’ll be looking at the Moscow residential market.

Kiev Ukraine – Place de Independance [Photo credits to Panoramas on Flickr]