Perhaps the single most prominent development for Central and Eastern Europe in the past year has been the influx of investors from South Africa. They have invested over €1 billion across the region in the last quarter, targeting office and retail investments, as well as development projects.
Many have attributed this to these investors’ insatiable ‘search for yield’. With a benchmark central bank rate of 7% and inflation running at close to 6%, not to mention the near 40% depreciation in the Rand against the Euro, it isn’t difficult to see why investors are so desperate to get their capital out into this higher yielding market.
In contrast with many Western European investors, South African investors have an inherent understanding of investments in emerging markets. Attractive yields, strong growth opportunities and stable currencies across Eastern Europe are the main drivers of investment, while the appetite for yield is fuelled by the capital from buoyant Johannesburg-listed real estate investment vehicles. For so long as the Rand remains volatile – and weak – international investment will remain attractive for South African investors, and the combination of an emerging market with relative stability will remain particularly seductive.