Deloitte Central Europe Real Estate Confidence Survey
Before and after: tracking the pandemic’s true impact on CE’s real estate market
A new report from Deloitte Central Europe on the opinions of the region’s real estate professionals uniquely compares respondents’ sentiment in January 2020, immediately before the COVID-19 pandemic, with their opinions three months later when the impact was at its height.
The key findings:
- The first round of the 2020 survey showed a market largely in equilibrium, with most practitioners expecting little in the way of changed market conditions and activity levels. After this positive overall outlook for the CE economy in January, the situation changed dramatically over the next few weeks: by April, 93% of respondents were giving negative answers and there were no optimists.
- A massive shift in market expectations can be seen, including respondents’ views on market activity, transaction sizes and yields as well as the plans and fears driving developers and investors.
- According to market practitioners, this new situation will undoubtedly force major changes in market structure and organisations’ approach.
- COVID-19 outbreak has caused almost 81% of developers and 75% of investors to make changes to their 2020 strategies, which may have a determining impact on the market.
- Around 92% of developers, 88% of investors and 94% of market advisors believe that the pandemic will affect the global economy over the long and medium terms.
- Expectations around the tax climate are less negative this might be the effect of government programmes published across CE during the first weeks of the pandemic.
- About 44% of our respondents expect yields to grow for the first time since the last global financial crisis.
- Most respondents believe the availability of investment products will increase, while investment efficiency is expected to deteriorate. They also expect the average size of transactions to decrease this year.
- There has been a noticeable positive effect on the logistics sector during the pandemic. Respondents predict significant growth in competition for new investment opportunities.
- The biggest challenge for developers before the crisis were acquiring development land (43%), increasing costs of building materials and construction works (22%) and labour availability and costs (18%). A mere three months later, three in four developers said this was their biggest challenge (38% commercialization and 35% project financing).
- Three-quarters of investors expect investment activity to decrease during 2020. In January, around 20% were expecting to focus on new markets in 2020. By April, that had fallen to 0%.
- More than half of investors expect the efficiency of their investments to deteriorate after the pandemic; 56% of market advisors share this opinion.
- Despite the pessimistic sentiment regarding 2020, it is the view of our respondents that the pandemic crisis will cause an increase in three years’ time in the number of investment opportunities.
The Deloitte Real Estate Confidence Survey for Central Europe is a market sentiment review, launched in 2019, which we carry out on an annual basis. In it, we ask three groups – developers, investors and market advisors from across the CE region – for their opinions on a range of issues relating to the regional economy and the real estate industry in particular.
Research for the second edition, due to fast-changing circumstances, was held in the first half of 2020 in two rounds: in January- February2020, before the COVID-19 pandemic, and in April 2020. The questionnaire consisted of two sections. The first focused on respondents’ opinions regarding particular aspects of the general economic conditions across CE in 2020. The second covered the individual business perspectives of each participant.