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Cash is king
Cash is king and quality rides high were the twin messages emerging from the CEE Insight Forum IV: Tropical Storm event in Budapest on Wednesday where over 120 of the CEE property sector’s top financiers, investors, developers and consultants convened against the backdrop of a hike in local interest rates to stave off a collapse of the Hungarian forent.
Produced in association with the Financial Times, the event focused in the impact of the current global financial crisis and macro economic turbulence on the CEE property markets.
Regional IMF head Christoph Rosenberg gave warning of a significant pull against continued growth in the CEE economies where a closer link exists between fiscal instruments and the real economy, coupled with the “external shocks” in commodity and energy prices, which “will put the emerging European economies to the test” and further expose countries with high levels of borrowing and foreign direct investment. Countries like Poland with more domestically driven economies are likely to experience a softer landing, he said.
He also highlighted the importance of a global focus on restoring the functioning of the financial markets, but that this must be supplemented by attention to the future regulation and supervision of the financial sector.
“It will be a huge challenge for some of the more exposed markets like the Baltic States, Hungary, and Czech Republic to engineer a soft landing.”
Markus Leininger of Eurohypo, Walter Hampel of Hypo Real Estate Group and Matthias Sandfort of Helaba all agreed that “the shop is closed” for new development finance until at least spring 2009 as it will take time for interbank trust to return following the recent shoring up strategy adopted by governments. Leininger said there is no choice, the banks are in intensive care, while Hampel foresees a total shift in lending terms in the medium term with simpler loan structures, higher costs on shorter term agreements and an end to single bank financing of loans greater than €200m. There will also likely be a significant shift from debt to equity finance in the foreseeable future.
Timo Tschammler of DTZ and Daniel Harris of investor MGPA both offered arguments for a “flight to quality” as investors target the highest grade assets in a “buyers market”, yields move out, supply drops significantly and vacancy rates soar. Discussion by the panel of senior market players centred around the challenges for developers in the downturn amid turmoil in commodity and labour prices as well as the financial crisis
