Real estate Analysis Paper

IntroductionReal estate market contribution to GDP in EU countries is around 10-15 per cent as compared to 20-25 per cent of industrialized economies.  There has been a steep Din wealth management and property owning among EU countries both with an increasing demand in domestic and international level.  EU new member states have gained the benefit of recognition of sources of foreign investments through liberalization policies of governments and free flow of trade and business at frontiers.

The important influencing factor for development of real estate market in EU is the use of Internet through which global property acquisition is made much easier. Searching for rented homes, apartments, villas, offering lease, buying and selling of residences is also just a click away for a property investor.  Even land for sale, construction of apartments is also being offered through bidding of projects on property web sites.

Web traffic of properties is changing at a fast pace than any other industry as the computer aided designs, architecture and engineering have been increasingly used for designing homes as never before which was much a laborious task with traditional methods of engineering and construction projects. Another factor is the investment flow from foreign investors in construction of residential properties in EU member states is on the rise from the year 2000 although there were upheavals to  a small percentage.

Czech republic, Lithuania, Estonia, Latvia, Slovenia Poland and  Hungary have been growing in real estate market taking the advantage of internet and government legislations and also these states a forecast substantial growth in real estate market for another two decades as the globalization has caused the necessity for migrants, workers, students to seek overseas opportunities wherein residences have become the prime most requirement for residing. Therefore construction of apartments, villas, independent homes are in great demand inviting the demand of local as well foreign investors. [1]

Case study : Prague, Lavosicka Development – Czech republic

For the next five years, investors in residential properties can expect 39 per cent return on capital as the prices are expected to grow at an average rate of 7.5 per cent per annum.  In the city of Prague at Lovosicka street  which is a perfect place for families, an initial residential development of 300 flats in ground+ five floors have been constructed and completed on 31st October, 2006.  The ground space is for car parking and vehicle parking for the convenience of residents.  The location is well placed in the center of the city, with neat and clean environment of greenery and centrally located nearby parks.

Buyers have been evincing interest in purchase of residential homes in Prague giving a scope for greater number of construction of residential apartments to be constructed in the vicinity.  Also there is an availability of complete range of services and infrastructure within access for the local residents.  Pricing of each apartment is ranging from 1854038 CZK – 3570315 CZK.

Also a total construction of  970 flats has been proposed  which will be built in several stages.   Easy access to shopping and entertainment, aquapark, fitness center, winter sports hall are also some of the attractions for buyers.  Another significant extension of metro “C” line which has added to improve the traffic service for the location and bus convenience which will reach city center destinations in 20 minutes.[2]

Risks in construction of apartments – Czech republic

The demand for well designed apartments is strong and also for low cost apartments. The market is divided between high end and a market that is controlled by local residents. However foreigners and expatriates continue to pay high rents as the apartments are well furnished and newly built.  Residential sales has been developing with the increase household incomes which is fuelled by the strength of the factors such as EU membership, growth in economic, stiff competition in mortgage and loan market.

Most of the first time buyers are looking for quality and affordable accommodation. In an overall situation, there is a growing percentage of   foreign property buyers who are residing or non-residents who are letting out the properties on the pretext of good appreciation of capital.[3]

Czech residential sector remains very slow for it is still considered as an  underdeveloped state hitherto.    Most of the apartments that are existent now are in need of repairs. Also the country  has ageing population and small families who look for small apartments whereas the rents are high.

  Case study:  Lithuania-Vilinius Residential update

Lithuania recorded a GDP growth of 6.7 per cent in 2004. In the year 2003, newly built apartments have grown by 15-30 per cent on an average and price of newly constructed apartments was in the range of 870 and 1,300 EUR/sqm.  According to Vilinius residential update, the demand for newly constructed apartments remains high with the fact that existing supply of residential apartments cannot meet the increased demand with the strong impact of EU’s access to the real estate residential market.

Apartments with one or two rooms is also in great demand which are available at a price of 700-800 EUR/sqm. Locations that are not too densely populated and having natural vegetation and water are on the rise for potential construction of apartments.

In 2005 slightly more than 300 apartments have been constructed in Antakalnis. In 2004, 2900 apartments were constructed which were all sold prior to the completion of projects. The mortgage rates were low and varied with 3.7 % and loans up to 95 per cent were offered using guarantees of properties.

The demand for two room apartment is rising with an offered rent of 350 EUR.  The tax is levied on land value and according to the market value which provides that the levy of tax in Vilinius is on the rise.  However a foreigner can and buy and sell property freely whereas purchase of land requires the permission of local authority.  Apartments are neatly finished, centrally located, affordable pricing and a provision for obtaining loans which is facilitating and boosting the interests of buyers to own residential apartments in Lithuania. [4][5]

Risks in construction of apartments in LithuaniaInvestment in Lithuania is suitable for investors who would like to undertake big risks. There are several legal peculiarities of property management which are very complex and confusing.  Another risk is the problem of shortage of labor force. There is a lack of construction experts and workers.  Due to this, there is a slow movement in construction as well in quality of work.

There are no good workers to pay high salaries.  Apart from this, partnering among construction companies due to the incapacities of construction companies is also a risk factor which is lowering the number of new projects for making investments in Lithuania.  Flow of liquidity, high payment of salaries, building teams for construction work, offering training for expertise knowledge, recruiting experienced workers etc.,  would solve the risk to some extent. [6]

Residential real Estate market in SpainThere is a lavish choice of apartments available in Spain for travelers, tourists and local residents.  There are also luxury apartments in Madrid £ 15/pp per stay of night. These apartments are also available for lease and rent with flexibility, privacy and comfort.[7]

Madrid being the capital city of Spain has been considered as a prestigious city which has become the prime cause for development of luxuriant residential apartments with an attractive price of $5000 per.sq.meter. Spain is recognized as 3rd preferred place for tourists in the world with almost 50 million visitors. (2000 Annual Report of World Tourist Organisation) The apartments in Madrid are provided only for short term rent.  Fully furnished and self-catering apartments are convenient for travelers, workers and tourists.

Investors of residential market, derive a large portion of income from letting out the properties mainly from employment centers in Spain.   Students who pursue education also look for low cost accommodation in the form of flats with basic amenities with moderate furnishings.[8]

Spanish citizens are well aware that there is a boom in real estate market whereas foreign investors and non-residents have to research in order to find perfect news in real estate market.  On one side, there is a heavy construction of property without proper budget and project management. Also after completion of buildings, buyers are hard to find with the way the construction is completed. On the other side, there is a growing tendency of strong economic fundamentals,  usage of economy resources and laying views on economic growth.[9]

There should be a decisive factor for investments in construction of property or for buying a residential property.  According to Spanish real estate property news bulletin 2006, developers need to understand and study the interests of buyers and in-depth research of Spain real estate market and current trend.  Spain is also dependent on in real estate for there is scope for provision of more jobs apart from airing a view on economic growth.

Construction of apartments in Madrid

Some of the constructed apartments in the city of Madrid,  are very quiet with double balconies to the street.  The apartment has 60 sqm having a double bed room living room and a kitchen fully equipped with electrical appliances and utensils. Bathroom is fully marbled flooring with sink and neat finishing.  Apartment is beautifully decorated offering warmth and comfort.

Apartment is offered with a rent  of  €700 / Week, which is including all amenities. [10]Apartments are advertised with complete details to let the apartment with contact details in web sites.  The advertisement of apartments ranges from a single bedroom apartment to three bedroom apartment.  Each according to the space and amenities offered a prescribed rent is to be paid by the or price to be paid by the buyer. [11]

Madrid has been the focus for residential stay as well as a holiday spot for various needs and letting the property has been the biggest business as it is the most essential need.  There are number of apartments which are well constructed, well furnished and well located in the city of Madrid.  Apartments have also been constructed according to the need such as whether accommodation is for holiday tourists, business travelers, students or for families.  [12] The environment and location and even the external outlook for building is neat which is constructed in Almeria. [13]

Compare Madrid flats with Czech Republic flats

Apartments in Madrid are offered on rent on the basis of short-term rent. Apartments are comfortable with adequate privacy, amenities for all group of tenants i.e. families, business travelers and holiday tourists.  These apartments are one to two bed room which are self-catering and centrally located.  The rent is ranging from EUR 60 – 160 according to the space area and furnishings. [14]

An apartment in Czech Republic is also offered on rent for short-term or long term depending on the need of tenant. A serviced apartment is cost effective and lower to 15-30 per cent as compared to the cost of hotel accommodation.  Rent pay is ranging from EUR 62 – 160 depending on the space and interiors that are provided within an apartment.[15]

Compare Madrid flats with Lithuania flats

There exist various differences between Madrid and Lithuania in construction of residential apartments in terms of architecture, design and engineering and in view of economic and location factors.  However employment, culture and traditions and life style continue to be on the upper trend in Madrid as compared to Lithuania.   Also the prices of rents and type of construction of flats is variant in Madrid and in Lithuania.  A luxury apartment with a single bed room which is well furnished  in Lithuania costs EUR 45 per person/day. [16]

In Madrid apartments are surrounded with green environment and rents are varying with the type of construction and amenities provided. A well constructed bed room apartment costs $1890 per week. [17] Lithuania’s economic growth was 6.5% in 2006 with a forecast of 6.2% in 2007.  Growth is mainly supported by both the government and private sector.  Investment in Madrid is controlled by local market players despite of the fact that foreign investors are highly interested in making investments in Madrid.  Markets are stable and forecast a  record of high growth in 2007[18].


The GDP growth in Spain recorded 3.4 per cent in 2005 with a continuous growth in 2006 and 2007.  However there are few risks in undertaking construction of residential properties such as mainly water.  Drought, water scarcity and untimely arrival of monsoon has emptied the reservoirs in 2005.  Adding to this, the development of residential properties would further increase the problem of water and there have not effective steps taken by local municipalities or government authorities whereas foreign investors have various plans of investments in real estate, a major set up for water planning has to be undertaken without leaving an hindrance.[19]

There are both risks and rewards in construction of apartments.  A strong research has to be undertaken to analyze avoidable, preventable and workout risks and execute project planning of apartments.

References1. Vilinius residential update

Reviewed on 14 January, 2007


3. Marcus Fichs (2007) Czech Real Estate Market overview and forecast 2007

Reviewed on 14 January, 2007

4. Dubravko Mihaljek, (2005) Real Estate Markets and capital flows in the context of EU accession.

Reviewed on 14 January, 2007

5. Simeon Mitropolitski (2000) Real estate market in Lithuania

Reviewed on 14 January, 2007

6. Neil Ebsworth, The real estate market in Europe (The Internet, consumer protection and EU Regulation)

Reviewed on 14 January, 2007

7. Local property market, The Czech Republic

Reviewed on 14 January, 2007

8. Lithuania property

Reviewed on 14 January, 2007

9. Mantas Sakenas, Lithuania reaps the fruits of construction boom

Rzviewed on 14 January, 2007