Next year will be a little better

Raiffeisen – Leasing has been operating on the Czech market for almost 30 years and provides a comprehensive range of financial products for financing movables and real estate, including additional services such as insurance and consultations related to subsidies.

The company specializes in financing investment needs in the field of machinery, equipment, technology, vehicles and real estate. The company employs specialists in financing aircraft, locomotives and other specific commodities. It offers a wide range of services to small entrepreneurs, businesses and corporate clients. For private individuals, the company finances cars and commercial vehicles. Alois Lanegger, former executive Managing Director of Raiffeisen – Leasing, answered Development News’ questions.

How does the current situation in the banking sector reflect in the real estate market?

While in general it can be said that the banking market looks good, the situation on the real estate market, which carries specific risks, is more complicated. Interest rates are still high, although they have already fallen slightly, the mortgage market is better off than a year ago, and the volume of mortgages granted is growing year on year. House prices and construction prices remain high and the whole construction market is forecast to decline next year, albeit not significantly. These are the reasons why banks and other financial institutions currently see the property market as somewhat risky. This is why we have to have higher collateral for the properties we finance, which may not always be entirely easy for our clients to accept.

Does this mean that developers are now waiting?

Developers are waiting and it is logical, it is caused by a decline in interest from buyers, high interest rates, high property prices and rising costs incurred for construction work, materials, energy. As a result of the current situation, many developers have already suspended some projects last year. They will start selling again when they complete the projects, i.e. when they have controlled the total cost of the project, in some cases they are waiting for a recovery of demand in the area.

According to the recent developments, it seems the market prefers rentals.

Rental yields have been relatively low in the past compared to sales yields. Leases were less attractive for developers, so they were more likely to sell their projects.  Now that rents are rising, also due to inflation clauses in most lease agreements, rental yields can be expected to match those from sales in the future.

Renting is a long-term investment for the developer…

Yes and no. Leasing will become increasingly lucrative, adequately matching the profitability and potential of each project.  If the developer decides to change its strategy in the future, they can sell the leased apartments later or put them into an investment fund.

Isn’t our rental legislation somewhat inadequate?

Rental legislation is certainly moving in the right direction, albeit slowly. If I compare the situation in the Czech Republic to the situation in, for example, Germany or Austria, the situation there is more complicated for landlords than here. Landlords there, for example, are in a more difficult position when they need to get non-paying tenants out of the rented property. There are certain tools for these situations, but it is a long way. Here, landlords are better protected.

What is the current mix of commodities that Raiffeisen – Leasing has in its portfolio?

Real estate makes up roughly 30–40% of our total portfolio. Of the ‘remaining’ majority, machinery, equipment and means of transport are the most important. We mainly finance trucks, trains, aircraft or production machinery and various technologies. Of course, financing cars is also important to us, and we mostly finance them for our clients in the form of a loan. Generally speaking, car financing is one of the more profitable products for leasing companies. Cars, commercial vehicles and trucks account for around 30% of our portfolio.

And the traditional question: What development do you forecast?

Personally, I think next year will be a little better than this year. Inflation is falling and interest rates will fall with it, and ČNB has also announced that if there is no extraordinary event, then interest rates will go down. With this, I expect that interest in mortgages will rise. People simply need a place to live and therefore have to deal with housing investments. I anticipate that companies that are cautious about new investments will also need to continue to invest.

Arnošt Wagner

Photo: Raiffesen – Leasing Archive