Regulation Needed to Tempt Investors to Eastern Europe

A lack of information about market prices is one of the major problems faced by international real estate investors looking at property in Eastern Europe today, it has been suggested...

A lack of information about market prices is one of the major problems faced by international real estate investors looking at property in Eastern Europe today, it has been suggested.

This is the view of Fotis Mouzakis, lecturer in real estate finance and investments at the Cass Business School, who believes that regulation would help the markets develop at a faster pace.

Speaking to Overseas Property Professional (OPP) and following news that a new set of property indices are to be introduced to the Romanian residential market, the academic is hoping that other emerging eastern European countries will follow Romania's lead. He argues that the measures will help independent financial advisors, agents and developers work out the risks and benefits of investing in the market.

Mr Mouzakis explains to the news provider that "even when indices based on a sound methodology are available, their usefulness is compromised [because they are] based on limited geographical coverage, inevitably leaving an information gap between assets and wider market trends". Indeed, too many of the facts and figures surrounding eastern European markets are obscure and unreliable and when "effective measurements are not available, investors have to rely on professional services, expert views and anecdotal information".

Interest in Eastern European Property Down

The lack of regulation in the markets may go some way towards explaining the latest report from foreign exchange company Moneycorp and the Rightmove property company. Interest and demand for eastern European properties has suffered since the recession, with Montenegro and Romania searches down more than 75 per cent and Bulgaria and Poland also far less in demand.

The lack of information surrounding these markets means that many property investors are viewing them with an air of caution and consider them to be a high risk purchase.

Robin Wilson, head of overseas at Rightmove, said: "Two years on from when the recession first started to really bite, it's clear that the overseas property market is radically different. "Dubai has been hit very hard, struggling to regain the peaks it saw. Eastern Europe has also taken a battering with previously hot destinations for investment returns falling out of favour."

Realistic Database

In Romania, mortgage lenders are sure to welcome the new price index - which has been made possible thanks to the large rise in the number of individuals buying property in the region.

In fact, this data is being used as a starting point by Mr Mouzakis who, alongside the property arm of EFG Eurobank Ergasias and Bankpost, will be helping to create the nationwide residential price index for the country. The methodology used, included dividing the national map into eight property regions, 11 main cities, two segments of the capital and a number of overall aggregates. Eurobank EFG Property Services chief executive Dimitrios Andritsos told OPP that the new indices will "assist us greatly in gaining a better insight into the current situation in the property market and in monitoring value fluctuations".

The plan is to produce the Romanian indices quarterly, starting this autumn, and then to move on to the other Balkan markets.

Regulation in Overseas Markets

Regulation and transparency is often linked with increased confidence in foreign markets.

Union Investment's Investment Climate Index, which tracks attitudes and expectations among European real estate professionals at six-month intervals, recently moved up to 67.5 points. As well as feeding off an increased optimism on the part of investors this upward trend is representative of an increasing confidence in major European markets, with much research pointing to a recovery in the property sectors.

However, while confidence appears to be returning in the major European markets, further afield investors appear more hesitant.

A new survey, conducted by Arabian Business, has found that a significant number of international buyers in the Gulf region are keen to see more regulation introduced to the markets. In excess of 70 per cent of those questioned revealed that additional protection measures would contribute towards inspiring more confidence in the sector, which has been hit hard in recent times.ADNFCR-3415-ID-800023302-ADNFCR

- Friday 13 August 2010

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