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Fprop CEE Snapshot
Q1 2016
 
 
 
 

 
 
 
POLAND:
 
 
GDP growth:
2015 (E): 3.6%, 2016 (F): 3.9%, 2017 (F): 3.5%.
 

 
Inflation:
2015 (E): -0.6%, 2016 (F): 0.8%, 2017 (F): 1.2%.

 

 
Interest rates:
1.5%, an all-time low (since Mar-2015) but the highest in Europe – reflecting high growth rate;
 
10 yr govt bonds at 2.9%, down from c5-6% in the years to 2012, and up from record low of c2% in Jan-2015.
 

 
FX:
EUR 1/ PLN 4.35 – relatively stable since 2012
.
 

 
General:
Growth driven by strong domestic demand, supported by improving labour market;
 
Low oil price benefits Poland as a net importer;
 
Relatively low govt debt to GDP ratio of c51% (controlled by statute at 55% of GDP).
 
Politics – new government elected Oct-2015 (Law & Justice Party, PiS):
 
Election pledges to be funded by increased taxes on banks (implemented) and large retailers (proposed);
 
Legislation already passed weakening the independence of the judiciary and media, resulting in EU formal review under the rule of law framework -> rating downgrade by S&P from A- to BBB+.
 
 
 

 
ROMANIA:
 

GDP growth:
2015 (E): 3.6%, 2016 (F): 4.2%, 2017 (F): 3.7%.

 



Inflation:
2015 (E): -0.6%, 2016 (F): -0.2%, 2017 (F): 2.5%.
 


Interest rates:
1.75%, an all-time low (since May-2015), down from 12.5% in May-2005;
 
10 year govt bonds at 3.4%, up from record low of c2.6% in Feb-2015.
 

 

FX:
EUR 1/ RON 4.4 – relatively stable since 2012.

 

 
General:
Private consumption accelerating, aided by VAT cuts from 24% to 20%, and from 24% to 9% on food sales;
 
Average net wages grew by c20% in 2015 but inflation is not expected to turn positive until 2017;
 
Low oil  price benefits Romania as a net importer;
 
Low government debt to GDP ratio of c40%.
 
 
 
 
COMMERCIAL PROPERTY:
 
 
Capital values:
Prime - increased in value in 2015 across all asset classes;
 
Secondary - remained stable. Secondary yields are still HIGH - c200-300bp higher than comparable property in UK / Western Europe.
 

Rents:
Record take-up in 2015 broadly matched by new supply = rents largely flat / marginally weaker.
 

Transaction volumes:
Increased in 2015 to €4.05bn, the highest since 2006 (€4.6bn). Dominated (55%) by retail.

 
 
 

 
COMMERCIAL PROPERTY:
 
 
Capital values:
RICS anticipate “meaningful and widespread capital value growth in 2016”;
 
Prime yields at 7.5% for offices and retail, at 9% for industrial.
 

Rents:
RICS expects rents to rise in 2016 for offices, edge up marginally for industrial and prime retail, but decline for secondary retail.
 

Transaction volumes:
Thin (2015 = c€700m).
 
 
 
 
CONCERN:
 
 
Cost of new government’s redistributive measures may impact GDP growth in due course.
 
 
 

 
CONCERN:
 
 
Illiquidity of commercial property market, population in decline.
 
 
 
 
 

 
 
Fprop Track record in CEE
 
 
   

…has been earning ROE >20% pa. for past several years;
 







…is ranked No. 1 vs IPD CEE universe for the annualised periods from the commencement of its operations in Poland in 2005 to the end of each of the years between Dec-2008 and Dec-2014.




 
 
 
 
Fprop CEE Investment Strategy & Property Requirements
 
 
 
Investment strategy:
 
 
Targeting higher yielding property to generate a minimum IRR & ROE of 15% p.a. (geared).
 
 
 

 
Property Requirements:
 
 
All sectors considered but focus on offices, retail and mixed-use;
 
 
Lot sizes of €5m+ with no ceiling;
 
 
Minimum 7.5%+ net initial yields - unless partially vacant, in which case lower.
 
 
 
 
 
 
 
Fprop Diary
 
 
 
 
 
 
 
 
 
Contact Fprop:
 

 

Jeremy Barkes
Director, Business Development
 
+44(0)20 7340 0270
http://www.fprop.com


 
1000 Companies to inspire Britain in 2015  
     
 
IPD  
FPAM funds have ranked No.1 versus the Investment Property Databank (IPD) Central & Eastern European (CEE) universe for the annualised periods from the commencement of its operations in Poland in 2005 to the end of each of the years between 31 December 2008 and 31 December 2014.
 
 
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