BUDAPEST -(Dow Jones)- Returns on Hungarian real-estate investments are an above-average 7.7% but will drop to 6.7% by 2010, Peter Kocsis, head of HVB Bank Hungary Rt.’s real-estate division, said Wednesday.
The average return in western Europe is 6.0%, Kocsis told reporters.
“The Hungarian market has a 170-basis-points premium compared to western European markets, but this will shrink to about 50 basis points over the next five years,” Kocsis said, citing an HVB study of office, retail, industrial and residential real-estate.
“With returns at 6.7% by 2010, we will see a general rise in real-estate asset values,” Kocsis said.
The amount of available top-quality office space is expected to grow by 30% during the next five years and monthly rent will stagnate at a level of EUR12 to EUR13 a square meter.
In the retail segment, available real-estate assets, or stock, will expand by 40% but the occupancy rate, now 90%, is expected to remain largely unchanged.
Industrial real-estate will register the highest level of stock expansion at 50% and monthly rental fees will be around EUR4 to EUR4.5 a square meter in the next five years.
Budapest’s residential sector will post a slight increase in the number of newly built apartments but price increases are expected to remain below the level of annual inflation.
The Hungarian market carries a number of risk factors, including its relatively small size and young age, as well as uncertain liquidity and short- term planning by a number of market players, the study said. Uncertainty is further boosted by the lack of market standards, excessive public spending and risks pertaining to the Hungarian forint.
Despite existing risks, HVB says the real-estate market will expand rapidly until 2008, when oversupply is expected to flatten the growth curve considerably.
-By Edith Balazs, Dow Jones Newswires; +361-267-0623; edith.balazs@ dowjones.com