Which countries in Central & Eastern Europe could be most affected by the Credit Crisis

Iceland's economic and banking woes have been splashed all across the news in the last couple of weeks, and quite rightly too as the situation is a mess (but a great/cheap opportunity to travel there as their currency has been hammered).

In light of the crisis in Iceland I thought I'd take a look at which countries in Central and Eastern Europe are the most at risk in going the same way, and thus which property markets you may want to avoid.

Starting with the worst first, in order:
1. The Baltics (Estonia, Latvia and Lithuania)
2. Hungary
3. Romania
4. Bulgaria

The Baltics in particular have had a huge property bubble that has been busting for a while now, the banks have tried to tighten up lending but they've been a little late and their actions have only speeded up the demise of the housing market. These are small and vunerable economies that have grown too quickly over the last 5 years and have not done enough to temper and sustain some of this growth.

Hungary has been a mess for a while, their economy just never did perform as well as some of their neighbours and the political malaise does not help. The Hungarian property market has not even seen some of the price growth that the Baltics countries have, and has poor mortgage finance for foreigners. Much of the nations mortgage borrowing has been in Swiss Francs leading to huge currency risks that could see people unable to afford their repayments if the exchange swing against them. Only recently has the Hungary started to impose restricts on this kind of lending, again too late.

Romania is another candidate for an economic mess. High, but unsustainable, growth and wild policies by the government that has tried to grow the economy too quickly. This has led to huge risks that the economy could falter. Mortgage lending to foreigners has never been very good and now has been stopped by the national bank pending a review. Romania is not a place I'd want to invest at the moment.

Bulgaria follows similar lines to Romania, though perhaps not as accute. Though their banks have only just recently started to tighten up their lending practices on the heavily over-inflated priced property on the beach and in the ski resorts. Time will tell as to how their banking sector will fair.

The other country I might mention in this list would be Ukraine, whilst not in the EU there are still similar banking and property sector risks as described above.

The Czech Republic, Poland and Slovakia should fair a lot better. Although I see their economic growth rates slowing, both their economies and property markets are more robust.

The world is definitely changing and no-one really knows how things will develop over the next year, but one thing is for sure now is a good time to have money in safe solid assets and cash ready for the opportunities that will abound when the world once again settles down.

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