Most attendees at the recent “CBRE Investment Breakfast” expect a similar investment volume to 2017 as more established investors are operating in Hungary, giving the market more stability, according to the organizers.
The ninth investment breakfast at the Sofitel Hotel Budapest Chain Bridge was attended by more than 80 investors, financiers and asset managers; it acts as a barometer on the state of the Hungarian property investment market, based on the opinions of property professionals surveyed at the event. Delegates at the recent MIPIM 2018 also saw improved investor sentiment towards Hungary.
In response to the question “What investment turnover do you expect in Hungary for 2018?” some 36% of respondents indicated that they expect total investment volume to reach last year’s sum of EUR 1.7-1.8 billion, 25% expected a higher volume at EUR 1.8 bln-2.1 bln and 28% expected less at EUR 1.3 bln-1.7 bln.
The world-wide trend is that investors are seeking to release more funds. CBRE recorded that more surveyed investors intend to deploy more capital in 2018 than in the previous year. Budapest, Prague and Warsaw are all now attracting German open-ended funds.
Asked which asset class they would purchase, 21% chose value-add offices, while 19% opted for newly built offices and 10% chose shopping centers. However, retail is still regarded as an attractive investment option.
“The retail market in the CEE region, especially the markets of Hungary, Czech [Republic] and Poland are incredibly interesting for investors, who continue to see rental growth within the shopping center sector,” commented Chris Gardener, head of EMEA retail investment at CBRE. “This is ultimately driven by increasing catchment populations, growing personal wealth, low levels of personal debt and strong consumer behavior. Poland and Hungary, for example, are showing lower levels of internet penetration rates at present of around 6% of total consumer expenditure, when compared to say Germany (10%) and the U.K. (17%),” Gardener added.
Yields are expected to further compress as CBRE put office yields at 6%, shopping centers at 5.75% and industrial at 7.75%.
Challenges to the Hungarian investment market include the geo-political climate, a possible rise in interest rates, rising construction costs and the possibility that property could be overpriced, according to CBRE. As many as 38% of respondents saw the main challenge to the investment market in Hungary as “scarcity of product”. This reflects the pent-up demand in Hungary as investors are ready to invest but there is a lack of product according to Tim O’Sullivan, head of capital markets at CBRE Hungary.
With regard to the type of investors operating in Hungary, 49% of the attendees expect Western European investors to be most active, 25% expect it to be Hungarian investors and 21% percent expect new capital.