Deloitte study: after a year of uncertainty, optimism returns to the real estate market in Central Europe

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Deloitte study: after a year of uncertainty, optimism returns to the real estate market in Central Europe

2 July 2021

The real estate market professionals in Central Europe returned to the level of optimism registered before the pandemic. Almost 40% of them expect an improvement in the general economic climate this year, 46% have positive expectations regarding real estate activity, and 48% rely on increasing the volume of transactions, according to the Deloitte Real Estate Confidence Survey for Central Europe 2021, conducted in the first quarter of this year in four countries in the region – Romania, Poland, the Czech Republic and Hungary. At the same time, 58% of the respondents expect the availability of investment products to increase in countries where they operate.

The participants in the study believe that the industrial/logistics and residential sectors are the most resistant to the negative effects of the pandemic. About 56% of investors expect the industrial sector to be the most competitive sector in the months to come in terms of new investment opportunities in the region. At the same time, residential for rent sector has seen a significant increase in attractiveness, the number of investors who consider it a priority nearly tripling from 6%, before the pandemic, to 16%, in the first quarter of 2021. A quarter of investors and 15% of developers say they plan to focus on this sector this year and, if the intentions materialize, 2021 may appear to be a breaking point in crystalizing a new investment product category in CE, according to the study.

Around half of respondents to the survey estimate that yields will stabilize this year, and one in four predict an increase in the months ahead.

“After the uncertainty that followed the pandemic outbreak, investors are again expecting increasing yields for their investment in the region. However, the highest shares of developers, investors and real estate market advisors believe the pandemic will affect the global economy over the medium or longer term, so all stakeholders must follow new opportunities and adapt their offer to changes in demand – lower demand for office space, additional requirements in the logistic area, resizing in the residential sector etc. Regional trends will be largely reflected also in Romania, but there may be a more specific relationship between supply and demand for certain types of assets, such as those in the residential sector, as well as an increased appetite from investors who have not been present so far in the local market,” said Alexandra Smedoiu, Partner, Deloitte Romania, and Real Estate Industry Leader.

Regarding the tax climate, the majority of the participants in the study have optimistic expectations, as 56% believe it will remain stable and 13%, that it will improve in the month ahead, while 32% expect it to deteriorate. The perception is very similar to that reported in Q2 2020, but quite different from the predictions from the pre-pandemic period (Q1 2020), when only 13% of respondents were pessimistic.

Developers’ views about the biggest challenges they face have changed over the past year. If, before the crisis, they saw acquiring development land, the increasing cost of building materials, and labour availability and cost as their biggest challenges, since Q2 2020, commercialization has been the main concern, reconfirmed in 2021.

Asked about the segments that will be most impacted in the months ahead by the effects of the pandemic, the majority of the respondents indicated the hotel, tourism and leisure sector, while a significant share selected the retail sector.

Deloitte has been conducting Real Estate Confidence Survey for Central Europe since 2019 to find out how professionals in this field perceive the market. Three groups of stakeholders participate in the survey - developers, investors and market advisors.

Deloitte provides worldwide audit, consulting, legal, financial advisory, risk advisory, tax and related services to public and private clients spanning multiple industries. Deloitte serves four out of five Fortune Global 500 companies through a globally connected network of member firms in more than 150 countries and territories, bringing world-class capabilities, insights, and high-quality service to address clients' most complex business challenges. Deloitte's goal is to make an impact that matters through its more than 330,000 professionals.

Deloitte Romania is one of the leading professional services organizations in the country providing, in cooperation with Reff & Associates | Deloitte Legal, services in audit, tax, legal, consulting, financial advisory, risk advisory, business processes as well as technology services and other related services, through 2,000 professionals.