Skyrocketing construction costs and a growing focus on the environment is triggering a shift in eastern European real-estate developers toward green refurbishment of existing buildings rather than the construction of new ones.
Increasing demand for buildings with higher environmental profiles has already boosted returns on such assets, while transactions of real-estate without a so-called ESG rating are becoming scarce, according to Kristof Barany, Managing Partner at Adventum Zrt., which buys and manages properties in Hungary, Poland, the Czech Republic and Romania.
“For many international institutional investors, ESG is becoming an entry threshold for investments,” Barany, whose fund manages a 600 million euros ($696 million) real-estate portfolio, said in an interview in Budapest. A rating regarding an asset’s environmental, social and governance impact adds roughly 10-25 basis points to exit yields when selling a property, he said.
Adventum on Wednesday announced that its Penta Fund bought Daimler AG’s headquarters in Warsaw for about 50 million euros. The building, developed in 2004, currently doesn’t have an ESG rating and Adventum plans to obtain one following upgrades to energy efficiency, Barany said.
Refurbishment, including insulation upgrades and the introduction of solar panels, is becoming relatively more cost efficient compared with new construction as costs spiral upwards. Inflation across the region is at or near the highest level in a decade or more, with building material prices surging even faster.
It may also be a greener solution than razing an old building and constructing another in its place, even if the a new one is a low- or zero-emission property, according to Barany. He said 30% to 50% of a building’s lifetime emission comes during construction.
Real estate deals in the eastern part of the European Union dropped to 9.7 billion euros ($11.2 billion) last year amid the coronavirus pandemic from a record 14 billion euros in 2019, according to data from Jones Lang LaSalle Inc.
Barany said business will pick up again as the region is showing strong economic growth and the pandemic accelerates “near-shoring,” a process where companies shorten their supply chains and bring outsourcing activities closer to their headquarters, which are usually located in western Europe.
Eastern Europe’s office market is set to become tight in two to three years as demand picks up and new developments slow due to rising costs, Barany said.
Adventum is 90%-financed by institutional investors, including German pension funds as well as Hungarian broker Concorde. The group is acquiring real estate with yields above 8% and aims to boost assets under management to 1 billion euros by mid-2022, Barany said.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
