According to CB Richard Ellis’s Central and Eastern Europe’s (CEE) Currency Fluctuations ViewPoint report, falling currencies in the CEE are impacting property investors, developers and occupiers across the region, with some countries more affected than others.

The key impacts of currency fluctuations on the CEE property market are that local currencies in the CEE have fallen in value over the last nine months; many CEE businesses and consumers took out loans or issued bonds in foreign currencies in recent years, when their currencies were much stronger; most countries in the CEE region are not part of the Euro-zone and recent devaluations have a material impact, particularly combined with the wider economic slowdown and homeowners face the prospects of falling house prices and also rising mortgage costs on mortgages taken in FX -denominated currencies (in local currency terms) has the potential to sharply reduce their disposable income.

In the CEE commercial property markets, it is property occupiers who are most affected in the short term. Whilst their earnings will generally be in local currency, rents will typically be denominated in euros. A fall in the local currency therefore represents an equivalent increase in rent. Over time, this will feed through into market rents, and thus investors are only partially shielded from the effects of currency changes.