Investors chasing higher rental yields in riskier markets

Property investors to 'take more chances'
By Jenny Davey

JONES LANG LASALLE, the global property consultant, said yesterday that property investors are poised to gamble on riskier ventures to deliver higher returns, amid the biggest scramble for commercial real estate in history.

The company said investors were looking at risky speculative development projects and were also buying buildings in less desirable locations. The move comes as record demand for commercial property has pushed up property values, squeezing rental yields.

Tony Horrell, chief executive of European capital markets at Jones Lang LaSalle, said investors were increasingly looking at eastern European cities such as Prague and Warsaw, where prime office rentail yields were typically about 7.5 or 7.75 per cent, compared with less than 6 per cent in Western Europe.

Mr Horrell played down the risks, saying that most activity surrounded buildings let to international blue-chip firms.

Jones Lang said that most commercial property remains in the hands of corporate owner occupiers, reducing the value of properties available to buy from €4,700 billion (£3,200 billion) to about €1,500 billion.

Nigel Roberts, head of European research at Jones Lang, said that the gap between demand and the limited amount of commercial property available was a key factor behind rising property investment prices at a time when underlying demand for rent property from business occupiers is weak.

Read more articles at Times Online

The Budapest Rental Market

The rental situation in Budapest has changed for the worst over the past few years. It is becoming increasingly difficult to find good tenants for centrally located apartments. A recent survey shows the number of investors buying apartments in Budapest has dropped from 19% to 13% during 2004.

Studio flats start at 200 euros/month, furnished, in the southern part of the 5th district (Brody Sandor, Kalvin ter). 225 euros get you a fully equipped, unfurnished, completely renovated studio in the bank district (Bathory, Oktober 6). 245 euros is the price for a 1-bedroom small apartment in the southern parts of the 5th district (Apaczai Csere Janos, Jozsef Attila). They ask for 265-286 euros for a nicely renovated, fully equipped, furnished studio, often 1-bedroom apt, in high-income central areas (Garibaldi, Apaczai Csere Janos, Deak ter).

There are 1-2 bedroom, fully furnished and equipped (including dishwasher) apartments available in very good areas, Deak ter, Vaci utca for 300 euros. 500 euros would get you a 80-90 m2 fully furnished and equipped apartment, renovated to a high standard, in the central 5th district, for example in Aranykez or Falk Miksa streets. From this one gathers that there are varying degrees of renovation.

There are 3-4-bedroom renovated apartments on the market for 650 and 740 euros/month in the good areas of the 5th district, in nice buildings, but they are either not rented, or have some special feature - Danube panorama or antique furniture.

Agencies in Budapest are generally doing a poor job of showing apartments to potential tenants, compared to Western standards, because of the high number of viewings, valuable time, for which they are paid very little, or not at all. This is why many investment apartments are not rented out - for tenants simply find other apartments by the time the property management or rental agency shows it to them. A number of management companies are also negligent in cleaning and repairing apartments, so they are no longer acceptable in an increasingly competitive market. One must find creative ways to motivate management companies, for each day of vacancy can cause culminating damages.

Let us look at surrounding, still central districts: 6, 7, 13 (Ujlipotvaros), 9 (Raday utca area). Furnished studios in the eastern parts of the 6th, 7th districts rent for 185 euros/month, in good condition (meaning not renovated). 245 euros will get you a renovated, furnished 1-bed apartment, equipped with appliances, in the same area, where streets are dark, buildings and stairwells are gloomy, but there is excellent access to anywhere for someone who needs a city apartment. A 6th district newly-built unfurnished studio rents for 265 euros, kitchen fully equipped. For 530 euros you can get a newly-built furnished 1-bed flat with a garage and balcony in 6th district Kaldy Gyula utca. For a similar standard one has to pay only 286-367 euros in a new development, in outlying areas of the 7th district. 1-bedroom, renovated, unfurnished apartments are advertised at 285 euros in 9th district Raday utca. They are asking for 327 euros for the same when furnished. Many apartment owners are trying to attract tenants by putting in a hi-fi stereo system and video, computer, and other similar items. Raday Street has certainly become popular among young people, it is a street with a soul, the trendy cafes and shops have made it a favorite. 1-bedroom, renovated, furnished apartments in the good parts of district 13 (Hegedus Gyula, Pannonia) are rented for 265-285 euros. In Cezar Haz, one of the new developments in the 13th district, a 1-bedroom brand new apartment with a large balcony and appliances rents for 450 euros/month.

This analysis shows us that there is hardly any difference between the 5th district and surrounding districts. If you can buy an apartment cheaper in the 6th, 7th districts, you will definitely get a higher yield. Capital appreciation is also destined to be slightly greater in the outer districts, for they will catch up with the 5th district. This does not apply to high-spec, elegant apartments, which are found only in the 5th district, along the Danube, and around the Parliament building, in the bank district, where rents are between 1000-1600 euros/month for large, beautifully renovated and fully equipped apartments with some special feature. Another significant phenomenon is the higher demand for central newly-built housing. Tenants will pay a much higher rent for a newer, more Western atmosphere, especially if garage space is included.

As the market matures, certain special locations and types of property will yield the best returns, while general centrally located mid-category apartments will continue to lose appeal for investors.

Written by Andras Patkai from BlavaBlava.com. You can sign up to Andras' Budapest newsletters here

Invest in Poland : Krakow

Apartment in stunning character building 

Those looking to invest in Poland might consider the beautiful city of Krakow. Krakow tends to be overshadowed in terms of investment by Poland's existing capital city, Warsaw. Karkow, however, is a city full of fine archiecture, character and a new-found energy and optimism.

And you can still pick up properties in the heart of the city for very reasaonable prices. The one above is for sale now by property-krakow, a Polish based consultancy business established to facilitate foreign investors in buying real estate in Krakow. The company is run by Robert Watkins.

The apartment is a stunning split level apartment located near to the main station and approx 8 mins walk from Krakow's market square and 2 mins walk to the under construction 'New town' development. It's available for the reasonable sum of €145,000. Great value!

Romania : A Worthwhile Investment?

Romania is not so much an emerging economy but rather a country on the brink of becoming an emerging economy. Like Bulgaria, it is set to join the EU in 2007 but unlike Bulgaria, Romania is struggling to overcome and alter its reputation for corruption and organised crime. For many it still conjures up images of bleak orphanages and communist desolation.

The good news the current government are keen to crack down on crime and the economy is growing, significantly enough to lead to a fall in unemployment and increased stability all round.

The country has some stunning landscapes and like Bulgaria has a small coastline along the Black Sea. The real estate market is severely underdeveloped at the moment, meaning that for those willing to take the risk and go in at ground level, Romania offers some excellent property bargains. You might expect to pick up an apartment in the centre of Bucharest for €25,000. Move out to the suburbs and you can find houses in need of renovation for as little of €10,000.

For the brave and optimistic, Romania, particularly Bucharest, offers great potential. There’s no doubt that the property market in Romania will take off. It’s just a matter of sitting it out and waiting. When the investors go in, the tourist will follow and you might expect development similar to those along Bulgaria’s coastline popping up along Romania’s coastline. After all, five years ago, who would have thought that Bulgaria would become a hotpsot of investment activity.

With this in mind, brave speculators prepared to sit on their investment for a few years, might be inclined to buy up land in Romania, particularly along the coastline and around some of Bucharest’s more up market suburbs. When the boom takes off, there’s no doubt that developers will flock into the Black Sea areas, the Carpathian Mountain regions and Bucharest’s suburbs.

New Restrictions on Foreigners buying Land in Turkey

It seems that while the rest of the world tries to attract foreigners by inviting them to buy property, Turkey is trying to keep them away! After seeming to endear itself to Europe by dropping a law that banned foreigners from buying property, last week a court ruled to restrict non-Turks from buying property in certain coastal areas. Apparently, these areas are considered 'military security zones' but in effect have no strategic military value at all.

The ruling seems to be a throw-back to an early 20th century law, established to prevent Greeks expelled from Turkey from returning and buying land, since to purchase property in these area requires title deeds to be in the name of a Turkish national.

Many foreigners buying land in Turkey do have the title deeds registered in a Turkish's friends name but this can have legal complications, if for instance, that friend died. The property would automatically transfer to his family. Many too, choose to buy land in thier own name but the chances are that the title deed may be cancelled at the whims of a Turkish court!

It may have sun, sea and cheap property but Turkey definitely requires cuation in respect to the legal aspects of title and ownership!

The Property Market in Slovenia

What you can get in Slovenia for £55,000 

You can find properties like this all over Slovenia. Situated amongst spectacular scenery and often near to ski resors, they make fantastic alternative holiday homes. You can view this one and more at
euroburo.com

Slovenia hasn't quite made the proeprty investment headlines in the same way that some of her new European neighbours have. However, while off to a sluggish start, the property market has been picking up in recent months. Property prices in Slovenia are still very competitve compared to her near neighbours and while most interest from serious investors has centred on her capital, Ljubljana, there are some spectacular properties to be had in many of Slovenia's rural tourist hotspots. The scenery is spectacular, particularly around Lake Bled in the Alps. The tourist industry is flourishing and you pick up a 8 bed-roomed mini-hotel for €250,000.

It's worth noting however, that property prices aren't rising as eagerly as they are in some of the other new EU member states so Slovenia is not the place for the investor looking for quick returns. However, it's a beautiful country for those who want a cheap alternative to the typical mediteranean hotspots. It even has a coastline, all 47 km of it!

Growing interest in property in Tallinn

I've noticed more and more media coverage on property in Estonia and the beautiful city of Tallinn. The Sunday Times Ireland featured an article on Estonia last Sunday. It seems that all the economic indictors are good for Estonia and it has something of the flavour of Ireland's early Celtic Tiger years. Those wishing to invest in the 'Baltic Tiger's' capital city, Tallinn, should look beyond the charming 'old town', according to Peter Conradi. Estonia, unlike its other new European counterparts, is not that cheap. You can expect to find a restored flat or a new build in the cheaper parts of the city centre for €1160 per sq. m that will yeild 7 - 8% returns. Buying in Vanalinn, the historic old town, you can expect to pay up to €2209 per sq. m. The good news, the buying procedure is very efficient and cheap by European standards. With finances in place you could have a sale completed in four weeks! Stamp duty does not amount to much, around 0.4% of the property price, land registry charges are as low as €150 and the seller and buyer share the notary fees! One thing to beware of however, is that rents have been falling in the past few months as more and more Estonian jump on the property ladder and buy thier own home, since interest rates on mortgages are as low as 3%!

About the Newsdesk

Hello everyone,
Property Newsdesk New Europe is one of many newsdesks maintained by proeprtyauthors.com, a property investment e-publishing company. Here you are guaranteed to find the most up-to-date information on buying and investing in Europe's newest member states. If anything shakes in the Central and Eastern European propety market, you'll hear about it here. We've teamed with dozens of experts and agents working in the Central and Eastern European property market, to bring you quality content that will prove invaluable to your search for a perfect investment. We'll showcase lots of spectacular properties, bargain homes, renovation projects and feature reputable agents who have are working in the exciting real estate markets finding homes for propety hunters and investors every day!