Just got back from Eastern EU last night. I spent some time(3 weeks) in Hungary and Romania. I can’t tell you that I spent 2.2 EURO/a bottle of water in Budapest or about $3.08 (at 1.4 to 1 conversion rate). The $ is getting killed and traveling costs for the regular American are skyrocketing.
I can not begin to tell you the real estate bubble inflating daily in Romania (I’ve heard/read Bulgaria too). Prices are extremly high vs. incomes and most of the buyers are:(1) other transplants working in the Western EU, (2) flippers, and (3) people lying to banks about their income to qualify for a easy loan. I was fairly shocked to see banks paying these prices for some below mediocre places (old communist like apartments).
Anyway, as long as credit is cheap or available (at least initially), people will continue buying (or stretching to buy). I laugh when I hear EVERYONE talking about RE investments and secure/high returns in short time. I guess S&P or Moody’s can’t rate risk properly in these countries yet. One would think they learn fast, but I guess RE in the emerging markets it is a “new economic model”….
I can not wait to see how these newly adopted econmic & RE standards hold up. I don’t think the Eastern Block has an economic model for recovery since they did not experience a true economic cycles in their newly open markets (so called capitalist market models).
