All time high investment volume is expected this year
April 4, 2017
In 2017, following its international assessment CBRE has created a survey among real estate investors in Hungary asking them about their market expectations. At the traditional springtime CBRE Investment Breakfast investors turned out to be optimistic about the future. 43% of the respondents stated that the investment market might grow even by one-fifth from last year’s EUR 1.5 billion, and 23% stated that this year they might reach their highest turnover ever.
The CBRE international survey reveals that after 2016, 2017 is also promising to be a strong year in the European real estate market; according to it 85% of investors would spend at least the same amount as last year to purchase real estates, with the total amount reaching USD 475 billion globally. The Hungarian investors are not lagging behind the international trends, either: CBRE Hungary presented the results of the international survey at their traditional Investment Breakfast and also asked the major local market players about their 2017 expectations.
43% of the respondents stated that the investment market might grow even by one-fifth from last year’s EUR 1.5 billion, and 23% stated that this year they might reach their highest turnover ever.
According to the survey we expect the domination of domestic investors also this year, after their 35% share in last year’s turnover. Gábor Borbély, CBRE Head of Research and Consulting said that a decline in the presence of US investors is expected this year as the dominant overseas funds have over weighted their home investments, and are therefore planning less capital export. Thus, the local investment market the traditional European investors, primarily on the German open-ended funds – revealed the national survey.
In contrast to the pan-European investment market where one-third of the investors named offices the primary target of capital, according to the investors participating in the Hungarian market survey said that office buildings have an outstanding 69% appeal, followed by hotels (14%) and by shopping and industrial real estates (8% and 8%, respectively), which - according to CBRE experts - clearly reflects the trend of the past years when we’ve been seeing an increase in tourism in Hungary and in particular in Budapest inducing significant hotel investments.
Over the last few years the general reduction of yield has urged real estate investors to find new alternative investment targets, such as student housing, theme parks, or even private educational or medical institutions. This type of investment has not been made in Hungary, yet but according to the industry players present at the CBRE Investment Breakfast student housing (49%), housing loans (27%), and medical and educational buildings (20%) in Budapest mean attractive investment possibilities in the future.
The CBRE presentation revealed that the rising interest rates in America have already influenced the European investors as they regard the possibility of a faster-than-expected
European interest rate hike the biggest threat in the real estate market. However, the national survey’s relative majority (43%) is betting on a further yield decline for another two years. In any case, it is a significant change that within a two- year horizon already some yield increase is projected by 16% as opposed to last year’s 0%.
However, participants of the Investment Breakfast do not fear the contraction of the developments’ marketing possibilities, yet but for 56% the rising construction costs are causing a great concern. 35% of respondents trust in the rising rents and 38% in further yield reduction, but according to 24% the current construction cost rally cannot be avoided without a profit decline.
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