Hungary is becoming more interesting for investors

The total investment transaction volume on the Hungarian real estate market is estimated to have been around €283 Mln in the first half of 2011, which includes only transparent investment transactions. “This is generally in line with our expectations at the end of 2010. Of this total, however, a significant portion was from regional and international deals” – said István LeRiche, Associate Director at Colliers International Hungary, concerning the latest investment market report.

In general, foreign interest toward Hungarian assets is increasing, but potential buyers are still making tours and assessing market entry, so this activity has not yet translated into specific deals. There are also some new foreign players looking to enter Hungary. Hungary is becoming more interesting for investors as current yield levels and lower rents provide a potential growth story for forthcoming years, when vacancy drops and rents rise as a result. Another positive sign is the reduction of the gap between buyer and seller expectations, which also points towards more deals happening in the future. Financing, however, remains difficult to secure and it is still the key to transactions. Banks are willing to lend only for the best products, which in turn defines demand somewhat.

For the year as a whole, Colliers International expects overall investment volume to reach €600 Mln in an estimate, driven by a strong pipeline of potential deals and more transactional activity in H2. There are a couple of market-changing deals underway that could significantly contribute to reaching, or even exceeding this target, and demonstrate investor confidence towards the country. In terms of yields, no significant change has been seen over the recent period, and no immediate improvement is expected. In general, investor interest for good quality office and retail projects is currently at around 7.5–8%, while “theoretical prime” industrial yields are between 9–9.5%.

The focus of investor interest remains high-class trophy assets in good locations or with long-term lease agreements, such as A-class modern offices, prime retail centres and industrial properties. Sustainability and green certifications are also becoming increasingly important to attract buyer interest. „We anticipate investors will remain cautious in the upcoming period, which means that sellers will need to have their house in order if they want to a have a strong chance of closing deals.” – summarized István LeRiche.