Nearly three quarters of property professionals in the UK will increase their exposure to Central and Eastern Europe property during the nex...

Nearly three quarters of property professionals in the UK will increase their exposure to Central and Eastern Europe property during the next two years, according to research conducted by Investec Private Bank.

Croatia and Poland are regarded as having the biggest potential for capital growth in residential and commercial property respectively.

The study, conducted by Investec Private Bank’s Structured Property Finance division, shows that over half ranked residential property as the property sub-sector with the best prospects for capital growth compared to 39 per cent for retail, 29 per cent for leisure, 27 per cent for industrial and 17 per cent for office.

Despite the fact that nearly all respondents believed that there is still potential for capital growth in Central and Eastern Europe, over three quarters consider bureaucratic issues to present the greatest problem facing property companies in the region. Nearly half of the respondents cited corruption and 48 per cent are concerned by legal issues.

Looking at residential property, Croatia was ranked by exactly 50 per cent of respondents as having the biggest potential for capital appreciation across Central and Eastern Europe.

In second place is Poland (33 per cent) followed by Bulgaria (31 per cent). For commercial property, 45 per cent of respondents regard Poland as having the best prospects, ahead of Croatia (39 per cent) and the Czech Republic (32 per cent).

Property professionals are least enthusiastic about Latvia and Lithuania in both property sub-sectors.

When asked their views of which countries outside Central and Eastern Europe had the strongest growth prospects, 50 per cent chose China followed by Australia (15 per cent) and South Korea (13 per cent).

“It has become increasingly difficult to find value in the UK with commercial property now trading at very keen yields compared to two or three years ago,” said Paul Stevens of Investec Private Bank’s Structured Property Finance team.

He added: “It’s no surprise therefore that a growing number of our clients are becoming more involved in Central and Eastern Europe. As well as the current favourites, Croatia and Poland, Germany is offering better value than the UK in certain sectors particularly when you take into account the lower cost of money.”