Monthly Archives: June 2009

Join the prime yields debate

There’s a debate brewing in the comments section over at our opinion piece from last week: Prime prices only for prime property. Click on over to see if you agree with any of them.


Investment pitfalls in CEE

You hear about the Irish guy who put money down on a new flat in central Budapest? Unfortunately, says the Irish Times, it isn’t a joke.

Development sites are lying idle in Budapest as in Dublin – and this has left many Irish investors, who put money down on apartments, in trouble.

Enter Harry Sexton, a former Irish solicitor who has lived and worked in Hungary for the past decade, advising both commercial and residential investors.

What kind of problems is he advising on? “I have 68 Irish investors who’ve paid substantial amounts – some 90 percent of €100,000 to €200,000 – to buy apartments in a development in the centre of Budapest where building work has stopped. Some owners were buying on the strength of borrowing against Irish property and face losing everything.”

Read the whole story here.

Martinsa-Fadesa reaches agreement with creditors

Martinsa-Fadesa, having gone into administration last year, looks to have worked out an agreement with its creditors. The Spanish developer has an increasing presence in Central Europe (including a major project in Budapest), though these activities are said not to be directly affected by the problems of the company at home.

EuroVegas schedule, budget revised

The Los Angeles Times has sniffed out some news that CIJ blogged about last week and wrote up in our magazine nearly a year ago. The newspaper reported on Friday that Hard Rock International was going ahead with its plans for Europe’s first Las Vegas-style casino, EuroVegas, near the Hungarian border with Slovakia and Austria.

Not much in the way of new information, though the article does mention the completion date has been pushed from next year to early 2012. Project costs have also been revised: last September, development director Alfred Supersberger told CIJ that the project had a budget of €600m, but that figure has since soared to €5bn.

“The site has a tremendous triangle of markets to offer,” [Hard Rock chairman Jim] Allen said. “The economic crisis here in Europe and throughout the world slowed the timetable … but we don’t think that this has any significance in the long run.”


Anyone who, like us, spent the weekend driving to Warsaw from Prague and back again will know there are a lot of torn up roads out there, flooded basements, and worse. The death toll currently stands at 13 and with more heavy rain in the forecast, there’s a lot more damage to be done. Hopefully it will only be to properties and infrastructure and any further loss of life can be avoided. If anyone knows of links to reliable charities or aid organizations, please post them in the comment section or let us know.

Resi developers should lobby for less math at school

It turns out that Bartosz Stawiarski, one of the commentators that CIJ likes to quote, has his own blog. In the latest entry, Stawiarski claims that the poor level of math education in Poland contributed to, among other things, the skyrocketing prices of new flats in the years 2006-2007.

An unprecedented carefreeness about costs showed recently when the bubble on the residential market was growing dynamically (not only in Poland, by the way). Thousands of families gave in to crowd mentality, according to which one had to buy a flat at a price that exceeded its real value up to three times. The purchase would be leveraged with a mortgage loan to be paid back through most of one’s lifespan. The mortgage would be best taken in the then record-cheap Swiss franc, following advice of so-called consultants who were either incompetent or cunning to foresee the Polish złoty become only stronger and stronger. One’s sense of maths and economy failed completely, as passive approval set in of a vision that the then market trends would be forever. (…)

As a result, the price of a resi sqm at the peak of the boom, in 2007, exceeded CHF 5,000. That meant paying in excess of one’s quarterly salary per sqm as well as the mortgage’s total sum and the amount of repayments to be paid monthly even for 30 years. (…) We’ve been seeing things getting back to normal in the last 18 months, though the process isn’t half-done yet.

Well, you can argue that the wild race to buy flats had as much to do with mob psychology than with math. Nonetheless, with the Swiss franc stronger and residential prices down (at least a bit) there certainly were buyers in 2007 that overpaid. The reality check for Stawiarski’s claims will come later this year, which is when some predict that prices will stabilize and get ready for a new upward march. Developers are surely the quickest to say so and CIJ will run an interview with one of them in the upcoming summer issue. Stay tuned.

Luxury retail still a draw in Budapest

Despite the news (PDF) from Hungary’s Central Statistical Office (KSH) that retail sales in the country dropped by 4.1 percent year-on-year in April, following a 3.6 percent drop in March, Budapest remains a favorite target of luxury retailers, according to a recent article in Hungarian business daily Világgazdaság.

In the last few years, high-profile brands like Gucci, Louis Vuitton, Roberto Cavalli and Burberry have opened locations on Andrássy út. Even with consumers restricting their spending, the latest reported sales have been encouraging, though they’ve likely been fueled more by tourists rather than local shoppers. The article notes (link in Hungarian) that Italian fashion brand Emporio Armani will also open a store on the boulevard in late July, and has spent around €1.25m renovating and designing the 500 sqm space.