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					RESIDENTIAL PROPERTY MARKET IN CEE

Standing its ground in a challenging environment




Erich Hampel, Head of CEE Division
Debora Revoltella, CEE Chief Economist

EBRD Annual Meeting
Kiev, 18 May 2008
    Executive summary


     Gap in supply: as a consequence of the transition process, home ownership is quite high in the CEE
      region, still in the context of a gap in supply. Acceleration in supply of new dwellings in the last years
      has been unable to fill the gap, which is even enhanced if quality standards are considered.
     Household plans: as income and living standards improve, demand for residential real estate is
      strong. 2 out of 10 households plan to buy an house in the next 10 years, mostly as an house to live
      in, but with some rising demand also for investment or second home purposes.
     House prices: the increases in house prices have been significant in the last years. It emerges
      clearly that income, access to credit and limited supply are drivers for real estate prices. We still
      believe that house prices in the region are compatible with an equilibrium level, although there might
      be out-of-equilibrium trends in some sub-segments.
     Affordability: the affordability levels have been reducing and the demand for house purchase is still
      mostly linked to the emerging middle class segment or to high net worth individuals. This means that
      on top of the existing demand, there might be a "potential demand" at the moment constrained by
      affordability issues.
     Some risks: there are however a few areas to monitor which might exhibit some oversupply – i.e.
      the holiday home sector in Bulgaria, or some imbalances in capital cities such as Bucharest. The
      bursting bubble in Kazakhstan should be the warning signal for the region.
     Looking ahead: despite a less supportive macroeconomic scenario, we keep a positive view.
      We forecast some moderation in growth trends, but no backlash, as gap in supply coupled
      with persistently lively demand represent a long term driver

2
    Agenda




        Residential Real Estate in CEE: supply and demand

        House price dynamics

        Challenges and opportunities ahead

        UniCredit Group: an active player on the market




3
    The transition process throughout the region resulted in very high
    home ownership rates, still in the context of a gap in supply


     Home ownership in CEE and Western Europe1,2,3                                                                                    Dwelling stock per ‘000 inhabitants1,4

                                Coo-
                               perative
                      27
         17




                                                                                                                                                                                                                                              486
                                                                                                                                                                                                                                    471




                                                                                                                                                                                                                                                               472
                                                                                                                                                                                                                           444
                                                                                                                 96




                                                                                                                                                                                                                 441
                                                                                                                                                                                                    435
                                                                                                                                                                                          424
                                                                                                       92
                                                                                91
                                                                                            91




                                                                                                                                                                                                                                                         413
                                                                                                                                                                                408
                                                                      87




                                                                                                                                                                    395
                                                                                                                                                          381
                                                                                                                                77




                                                                                                                                                 338
                                                           74




                                                                                                                                      323
                                                  71
                                        68
                               67




                                                                                                                           64
                      59
         47




                                                                                Lithuania
                                                                      Hungary




                                                                                                                 Romania




                                                                                                                                                                    Lithuania


                                                                                                                                                                                          Hungary
                                                                                                                           EU
         Czech Rep.
                      Poland
                               Russia
                                        Estonia
                                                  Latvia
                                                           Slovakia




                                                                                            Bulgaria




                                                                                                                                                          Romania


                                                                                                                                                                                Ukraine
                                                                                                                                CEE




                                                                                                                                                                                                                                                               EU
                                                                                                                                                                                                    Czech Rep.
                                                                                                       Croatia




                                                                                                                                                 Poland
                                                                                                                                      Slovakia




                                                                                                                                                                                                                                    Estonia
                                                                                                                                                                                                                           Latvia


                                                                                                                                                                                                                                              Bulgaria


                                                                                                                                                                                                                                                         CEE
                                                                                                                                                                                                                 Croatia
       The privatization in the early 1990s led to widespread private ownership, with around
        77% of the housing stock being currently owner-occupied vs 64% in the older EU states
       Still the CEE region residential market is characterized by a housing gap

    Notes: 1\ EU: AT, DK, FI, FR, IT, NL and ES; last available Census for EU countries; 2\ Data as of 2001 for BG, CZ, HR, LV, LT and SK; as of 2005 for HU
    and RUS; as of 2006 for EST, PL and RO; 3\ Calculated as ratio between owner-occupied dwellings over total occupied dwellings measures in physical units,
4   except for Russia (sqm); 4\ As of 2001 for LT, 2006 for BG, HR, EST, LV, PL, RO and UKR and as of 2007 for CZ, HU and SK
    Sources: UniCredit Group CEE Research Network, Department of the Environment Heritage and Local Government (Ireland), UNECE
    Construction activity has been strong in the last years, especially in
    the capital cities and urban areas, but well below western standards


              Dwelling unit completion per ‘000 inhabitants1,2
        20                                                                                                                                                                     IRELAN


                              Average 2000-2004               Istogramma 2             Average 2005-2007
        15
                                                                                                                                                                                 SPA

        10
                                                                                                                                                                                   E

                                         4.7
          5                      3.9                                 4.0                                                                        3.9
                                                        3.4                3.2 3.7                                 2.9 3.2                2.8
                                               2.7                                             2.8           2.2                                      2.4 2.8
               0.9
                        1.6                                   1.2                                    1.4                      1.3 1.8                              1.4 1.8
                                                                                         0.5
          0




                                                                                                       Lithuania
                                                                             Hungary




                                                                                                                                Romania




                                                                                                                                                                     Ukraine
                                                 Czech Rep.




                                                                                                                     Poland




                                                                                                                                            Russia
                                                                Estonia




                                                                                           Latvia




                                                                                                                                                        Slovakia
                   Bulgaria



                                    Croatia




              % of dwellings built after 19903

                 7.2               8.8          8.3            5.3          11.1          n.a.         7.1          12.9       11.5         n.a.        6.9          n.a.




    Notes: 1\ EU proxy including AT, DK, FI, FR, IE, IT, NL and ES; 2\ BG, HR and RUS (no. of apartments): 2000-2006; 3\Census data (last available year)
5   Sources: UniCredit Group CEE Research Network, Department of the Environment Heritage and Local Government (Ireland)
      The housing gap is enhanced when quality standards are considered


          Average usable area per dwelling1,2                                                  Average number of rooms per dwelling1,2

                                                                                                                                                                                                                        4.2
                                                                               87
                                                                                                                                                                                               3.6 3.7
                                                     74 76 77                                                                                                                       3.2
                                                70
                                  64                                     63                                           2.8 2.8                                                                                     2.8
                         59 61 62                                                                         2.6 2.6 2.7
                55 55 56                                                                      2.3 2.4 2.5
           50
                                  Lithuania




                                                            Hungary
            Ukraine




                                                         Czech Rep.




                                                                               EU
                                               Poland
                                              Bulgaria
             Russia



                      Slovakia




                                                                                                                  Lithuania
                        Latvia

                       Estonia




                                                                                                                              Hungary
                                                                         CEE




                                                                                                                                        Romania
                                                                                               Ukraine
                                               Croatia




                                                                                                                                                  Czech Rep.




                                                                                                                                                                                                                        EU
                                                                                                                                                                                                         Poland
                                                                                                                                                               Bulgaria


                                                                                                                                                                                    Slovakia
                                                                                                                                                                                               Estonia
                                                                                                         Latvia




                                                                                                                                                                                                                  CEE
                                                                                                                                                                          Croatia
                                  Romania




           The communist regime left the CEE region with a unique housing stock of relatively
            recent, but often rundown homes
           Quality and maintenance issues are particularly relevant in some CIS countries
           In Central European countries, like Hungary and the Czech Republic, quality
            standards are much more similar to western ones

    Notes:1\ EU proxy including AT, DK, FI, FR, IT, NL and ES; 2\ EU: Census data (last available year). As of 2001 for BG, CZ, HR, LV, LT and SK;
6   as of 2005 for RUS and UKR, as of 2006 for EST, HU, PL and RO
    Sources: UniCredit Group CEE Research Network, Department of the Heritage and Local Government (Ireland)
      Income convergence and improving living standards as drivers for
      demand for new residential real estate properties

           GDP per capita (EU27=100 in PPS)

                                                                                                                               2000                   2007
                                                       81
                                                  69               72                                                                                                    68
                                                                                    64                                  60
                                     58                                        56                    57                                  55
                               46                             45                                                                 48                                50
                       38                                                                    37                   39                                      41                           40 43
               28                                                                                                                                    26




                                                                                Hungary




                                                                                                                                                                                        Turkey
                                                                                                                   Lithuania
                                                  Czech
                  Bulgaria




                                                                                                                                                      Romania




                                                                                                                                                                     Slovakia
                                                               Estonia




                                                                                                  Latvia
                                 Croatia




                                                                                                                                      Poland
                                                   Rep.



        Net financial and real wealth in CE1,2                           Net financial and real wealth in SEE1,2                               Net financial and real wealth in BE1,2
        (Index 2004=100)                                                 (Index 2004=100)                                                      (Index 2004=100)
         110                                                             110                                                                   110

         105                                                             105                                                                   105

         100                                                             100                                                                   100

          95                                                              95                                                                    95

          90                                                              90                                                                    90
                 2004        2005          2006        2007                    2004        2005            2006    2007                               2004       2005           2006      2007
                      Net financial wealth                                          Net financial wealth                                                  Net financial wealth
                      Net financial and real wealth                                 Net financial and real wealth                                         Net financial and real wealth


    Notes: 1\ CE: CZ, HU, PL and SK; SEE: BG, HR and RO; BE: RUS andTK; 2\ Net financial wealth is defined as the difference between households’
    financial assets and liabilities; proxy for the overall accumulation of both financial and real wealth using the difference between households’ financial
7   assets and the non-mortgage component of debt
    Source: UniCredit Group CEE Research Network, Eurostat
    Survey data show strong potential demand, mostly as primary house


         General likelihood to buy new house/flat (%)1,2

                           Yes in next 3 yrs           Yes in next 10 yrs            Maybe after 10 yrs
                                                                                                                             2 out of 10
                                                                         5
                                                                                                                              households intend to
                                                  7
                   9                       6
                                                                                 5
                                                                                                                              buy real estate
           6               6                                       8     9
                                     5
                                           8      10
                                                          6
                                                                                 8
                                                                                          7
                                                                                                 4
                                                                                                                              property
           7       9       8                                       7                             5
                                     7                    7                                                  5
           6       5       5         4
                                           7      7
                                                          4        5
                                                                         11
                                                                                 6
                                                                                          4
                                                                                          4
                                                                                                 7           3               9 out of 10 potential
                                                                                                             2
                                                                                                                              buyers are seeking
          Avg     SI     CZ      HU       SK     HR      PL       RUS   RO    SRB        BG     BIH UKR
                                                                                                                              for a house to live in
                                                                                                                             Some rising demand
         General likelihood to buy new house/flat, by purposes1,2,3                                                           associated to
            2
            4      4       2
                           1         1
                                     5     2
                                           0
                                           4      3       1
                                                          2        5
                                                                   0     7      0
                                                                                3         1
                                                                                          6      3
                                                                                                 6           1
                                                                                                             7
                                                                                                                              investment or
            5      6       5         4            8                4            9
                                                                         4                7      3           4
                   4                              8                      6                                                    vacation purposes,
                                                                                                                              particularly in
                                          94              96
                                                                                                                              Croatia, Bulgaria
           88      86     91         90                            91           87       86     88        88
                                                  81                     82
                                                                                                                              and Romania


          Avg      SI     CZ     HU       SK     HR      PL       RUS   RO    SRB BG           BIH      UKR
                Main place to live         Investment (to rent)         Secondary house              Other


    Notes:1\ Survey involving 1,000 individuals (more than 2,000 in RUS) aged >15 and living in the largest cities of the country; all interviews
8   were conducted as personal face-to-face interviews by Bank Austria’s long term partner agencies (GfK, RmPlus, TNS); 2\Countries are
    ranked by level of per capita GDP; 3\ Sample represented only by those willing to buy new house/flat
    Sources: UniCredit Group CEE Research Network, Bank Austria Market Research
    Demand mostly associated to higher income classes …



        General likelihood to buy house/flat, by income1


                                       Propension top 30%                                  Propension 30-51%                                  Propension 51% and less

                                                                                          34                                            34
                                                                                           30
                                       28                 28                         27                                  27                             27                                 27
           26                                                                                             26                             26
                           24 25                                                                                          23                                           23
                                         21
              18            19                                                                                                                           19
                                                                          17                                                                       17                   17
                      14                                                                                   15                      15                             14                                     15
                                                                         13                          13                                                                                         1213
                                                     10                                                             11
                                                               9 10                                                                                                                                       10
                                                                                                                                                                                                                        8
                                                                                                                                                                                       7
                                                                              Slovakia
                            Slovenia
                Average




                                                                                                                                             Romania
                                                                                               Croatia




                                                                                                                                                                                                              Ukraine
                                            Czech Rep.


                                                               Hungary




                                                                                                               Poland




                                                                                                                                                             Serbia


                                                                                                                                                                            Bulgaria


                                                                                                                                                                                                Bosnia
                                                                                                                              Russia



    Notes:1\Countries are ranked by level of per capita GDP
9   Sources: UniCredit Group CEE Research Network, Bank Austria Market Research
      … and younger generations


           General likelihood to buy house/flat, by age (%)1
                                                                                            <29             30-39        40-49       >50




                                                             55
           50




                                                42




                                                                                                  42
                                    40




                                                                                         34
                        32
              31




                                                                 31




                                                                                                     31
                        30




                                                                                                                  29
                                                                         29




                                                                                                    28
                                                                         27



                                                                                        27




                                                                                                                                        26
                                                                                                                            26
                                                                                                                25



                                                                                                                            24
                                                               23
                                         23



                                                    22




                                                                                                                                      20



                                                                                                                                                20
                                                                                                                8
                                                                                                               18
                                                                                     17




                                                                                                        7




                                                                                                                                      7
                 15




                                                                                                                          16



                                                                                                                                     15
                                                                                      6
                                                  14
                              5


                                      13
                 5




                                                                                                                                              12
                                                                               4
                             11




                                       4



                                                  4



                                                                   4




                                                                                                                          4
                                                                              10




                                                                                                                                               4
                                                                                                                                              9
          Slovenia Czech R. Hungary Slovakia                Croatia      Poland      Russia     Romania         Serbia    Bulgaria   Bosnia   Ukraine




           Evolution of CEE population aged 15-39Y in 1981-2025F2
           (% yoy growth)
           2.0                                                                            Tot pop               15-39Y
           1.0
           0.0
          -1.0
          -2.0
          -3.0
                 1981         1986            1991          1996           2001            2006             2011         2016         2021

     Notes:1\ Countries are ranked by level of per capita GDP; 2\ CEE: BG, CZ, EST, HU, LV, LT, RO and SK
10   Sources: UniCredit Group CEE Research Network, Bank Austria Market Research, Eurostat
     Agenda




         Residential Real Estate in CEE: supply and demand

         House price dynamics

         Challenges and opportunities ahead

        UniCredit Group: an active player on the market




11
      Growth in house prices has been persistently high …


      Residential property prices in the enlarged Europe
      (yearly average increases 2002-2007)1,2




     Notes:1\ Growth rates calculated in local currency (nominal terms). All data used are from NCBs and local Statistical Offices and refer to non-harmonised national
     sources, thus any comparison on the dynamic of house prices across countries should be taken with care; 2\ B, DE, IT: 2002-2005; NL, PT, LV, LT: 2002-2006.
     House prices for Latvia and Ukraine refer to capital cities
12   Sources: UniCredit Group CEE Research Network based on National Statistical Offices, NCBs, Department of the Environment Heritage and local Government
     (Ireland)
     … but mostly compatible with the convergence story …


                                                                                                                        Improving household financial
         Actual vs equilibrium prices in 2000                                                                            conditions and limited supply remain
         and growth rates of actual prices3                                                                              key drivers of strong demand (1%
                                                                                                                         increase in income and supply result in
                                                100.0                                                                    1.1% and -2.8% change in prices,
                                                                                                                         respectively)
                                                              Croatia
         1




                                                                                                                        The large inflows of immigrant workers
          Actual prices vs equilibrium (2000)




                                                 80.0
                                                                                                                         toward EU contributed to higher demand
                                                                                                                         for housing through substantial inflows
                                                 60.0
                                                                        Poland                                           of remittances (1% increase in the ratio
                                                                                   Russia
                                                                                                                         of remittances over GDP results in 0.6%
                                                 40.0                   Slovakia          Estonia
                                                                                                    Romania
                                                                                                                         increase in prices)
                                                              Hungary
                                                                                              Lithuania
                                                              Czech R.
                                                                            Bulgaria
                                                                                                      Latvia            Fast development in the mortgage
                                                 20.0                                                                    market and greater availability of
                                                                                                                         credit at better conditions might have
                                                                                                                         spurred the growth of house prices (1%
                                                  0.0
                                                        0.0         10.0           20.0             30.0        40.0
                                                                                                                         increase in the ratio of mortgages over
                                                          Growth rates 2001-2007 (real terms, local currency)
                                                                                                                2        GDP and interest rates results in 0.2%
                                                                                                                         and -0.01% change in prices,
                                                                                                                         respectively)

     Notes: 1\ CZ: 2001; EST, LT, PL, RO, SK: 2002; RUS: 2003; 2\ EST, PL, RO, SK: 2003-2007; LV: 2001-2006; LT: 2003-2006; RUS: 2004-2006; prices for Latvia
     refer to Riga suburbs, while for Romania to Bucharest; 3\ Equilibrium house prices are calculated based on out-of-sample estimation by regressing house prices
13   (expressed in real terms) on GDP per capita in PPS and mortgage rates using Eurozone countries as a benchmark
     Source: UniCredit Group CEE Economic Research
     … and with no major deviations from equilibrium trends


         Real estate prices, country average                                                    Ratio of real estate prices over
         (EUR per sqm)1,3                                                                       equilibrium prices in 20072,3,4

                                 1,104
           Slovakia                                                                             Slovakia
                           418
                                       1,605
             Russia                                                                              Russia
                           430
                                             2,177
           Romania                                                                             Romania
                           407
                                         1,968
            Poland
                             766
                                                                                                 Poland
                                 952
           Lithuania                                                                           Lithuania
                           366
                                    1,372
              Latvia                                                                              Latvia
                           461
                               1,009
           Hungary                                                                              Hungary
                            527
                                    1,404                                                        Estonia
            Estonia
                           433
                              787                                                              Czech R.
        Czech Rep.
                           393
                                      1,693                                                      Croatia
            Croatia
                                 1,129
                         558                                                                    Bulgaria
           Bulgaria
                       167

                       0         500        1,000    1,500    2,000   2,500   3,000                        0      20       40       60       80       100   120


                                            2002       2007



     Notes: 1\ LV, LT: 2006; 2\ LV, LT, RUS: 2006; 3\ Prices for Latvia refer to Riga suburbs, while for Romania to Bucharest; 4\ Equilibrium house
     prices are calculated based on out-of-sample estimation by regressing house prices (expressed in real terms) on GDP per capita in PPS and
14   mortgage rates using Eurozone countries as a benchmark
     Source: UniCredit Group CEE Economic Research
      Housing investment affordability has significantly decreased over
      the last years

          Affordability Index (2007)1,2




                                                                                                                                                                         7.0
                                                                                                                                                                                                                                            Over the last years, growth




                                                                                                                                                            4.8
                                                                                                                                                   4.1
                                                                                                                                          3.2
                                                                                                                             2.8
                                                                                                                  2.6
                                                                                                     2.5




                                                                                                                                                                                                                                   2.5
           Czech R. 1.0
                            Hungary 1.4
                                          1.8
                                                    Slovakia 1.9
                                                                      Estonia 1.9
                                                                                    Lithuania 2.1




                                                                                                                                                                                      Austria 0.5
                                                                                                                                                                                                    Finland 0.6
                                                                                                                                                                                                                  France 1.9
                                                                                                                                                                                                                                             in real estate property prices
                                                                                                                                                                                                                                             was much higher than in
                                                                                                     Kazakhstan




                                                                                                                                                            Ukraine
                                                                                                                                                                         Romania
                                                                                                                                                   Russia
                                                                                                                             Poland
                                                                                                                                          Latvia
                                                                                                                  Bulgaria
                                          Croatia




                                                                                                                                                                                                                                   Italy
                                                                                                                                                                                                                                             wages. This results in a
                                                                                                                                                                                                                                             sharp deterioration in
                                                                                                                                                                                                                                             housing affordability
        Affordability of housing investment3                                                                                                                                                                                                Low affordability implies that
        (percentage of households over total)                                                                                                                                                                                                in many countries demand
                                                                                                                                                                                                                                             for house purchases
                    50.6                            48.0                                                                                                                                                                                     remains mostly related to
                                                                                                                                                                                                                                             the emerging middle class
                                                                                                    16.3                       14.5
                                                                                                                                                                                                                                             segment or to high net worth
                                                                                                                                                            13.0                   10.0
                                                                                                                                                                                                                     3.3                     individuals
                                                                                                     Hungary




                                                                                                                                                                                    Romania
                                                                                                                                                              Czech R.
                                                                                                                                      Poland
                          Slovakia




                                                                                                                                                                                                                        Bulgaria
                                                            Croatia




     Notes: 1\ The affordability index is calculated as house prices (€ per sqm)/ average gross monthly wages; 2\ As of 2006 for Latvia and Lithuania; 2005 for Italy,
15   Finland and Austria and as of 2003 for France. Prices for old EU Countries (except Finland), Latvia and Romania refer to the capital cities; 3\ Share estimated using
     an affordability index benchmark of 2 (measured as house prices per sqm over gross monthly wages) and official statistics on households’ income distribution
     Sources: UniCredit Group CEE Research Network, Department of the Environment Heritage and Local Government (Ireland)
     Agenda




        Residential Real Estate in CEE: supply and demand

        House price dynamics

        Challenges and opportunities ahead

        UniCredit Group: an active player on the market




16
     The current macroeconomic scenario might be less supportive for
     the residential real estate market …


       Some deceleration in growth, as the economic cycle        … with international repricing of risk to lead to some credit
       peaked in 2006-2007, but still very high rates…           tightening and possible lowering of capital inflows




     Real GDP and gross monthly wages                             ∆ CDS spread vs USD (June ’07- April ’08)
     % growth p.a. 2008-2010                                      bps
                                                                                                                                190
                                                    13.6
                                12.5                                                                     157
                                                                                                                139
                                                                                                   126
             9.3                                                                             111
                                                                       95                                                  96
                                                           5.8                          65
                   4.6                 5.0                                                                            60
                                                                            39
                                                                  28
                                                                                 19


               CE               SEE&B (1)          Broader        PL HU CZ SK         HR BG RO LV              UKR RUS TK KZ
                                                   Europe
                                                                       Central               SEE &                Broader
                                                                       Europe                Baltics              Europe
                         Wages               Real GDP




17   Note:1\ Including Estonia and Lithuania
     Source: UniCredit Group CEE Research Network, Bloomberg
      … but the mortgage market will continue to expand


            Housing loans (% of GDP, 2007)                            Housing loans volume1 (EUR bn)

            Netherlands                                          70   CE                       17%
            Portugal                                       62
                                                                                                     113.3
            Spain                                        56                       39%
                                                                                        70.5
            France                             35
                                                                           26.2
            Germany                           33
            Austria                     23
                                                                           2004         2007         2010F
            Italy                     17
                                                                      SEE&B
            Latvia                            34                                               21%
            Croatia                   18
                                                                                  54%
            Lithuania                 17                                                                 45.5
            Czech R.                                                                    25.4
                                     14                                     6.9
            Hungary                 12
                                                                           2004         2007         2010F
            Bulgaria               10
            Poland                 10
            Slovenia              8                                   TK+RUS+UKR               56%
            Slovakia              8                                                                  164.7
            Ukraine              6                                                84%
            Turkey              4                                                       43.7
                                                                           12.9
            Romania             4
            Russia             2                                           2005         2007         2010F

18   Note:1\ CE: PL, CZ, SK, HU, SI; SEE&B: BG, HR, RM, LV, LT                                       x      % growth p.a.
     Sources: UniCredit Group CEE Research Network, ECB
      Gap in supply matched to continuously lively demand will remain a
      clear driver for long term sustainability

                                                                                                        Bulgaria: more selection to come on the holiday
          Years to saturation1                                                                           home segment

                                                               32                                       Croatia: monetary tightening is expected to slow
                                                                                                         otherwise solid growth

                                                                                                        Czech Republic: no housing bubble on the
                                 26
                                                                                                         horizon (yet)

                                                                                  21                    Hungary: some oversupply, but no evidence of
            19                                                                                           price bubble
                                                                                             17
                                                                                                        Kazakhstan: bubbles do burst
                       13                   14        14
                                                                                                        Poland: first signs of stabilization, but housing gap
                                                                         11
                                                                                                         remains

                                                                                                        Romania: some cooling but still with high potential
                                                                                                         in the mid term

                                                                                                        Slovakia: still healthy growth potential on the
                                                                                                         horizon
                                 Czech R.

                                            Hungary




                                                                         Russia




                                                                                             Ukraine
                       Croatia
            Bulgaria




                                                               Romania
                                                      Poland




                                                                                  Slovakia




                                                                                                        Turkey: still a market for few people

                                                                                                        Ukraine: untapped potential in the medium-high
                                                                                                         segment, with some cooling on the luxury one


     Note: 1\The number of years before saturation in the residential property market is calculated as the ratio between the estimated market potential (total
     number of households willing to buy a new house/flat) and the current level of construction activity (based on last available data) under the extreme
19   assumption that all potential buyers will look for new housing
     Sources: UniCredit Group CEE Economic Research, Eurostat
     Agenda




         Residential Real Estate in CEE: supply and demand

         House price dynamics

         Challenges and opportunities ahead

         UniCredit Group: an active player on the market




20
     Number 1 Network for Mortgage and Real Estate Financing



      Mortgage and Real Estate Market in
       CEE shows great potential for future
       growth.

      With a presence in 20 CEE countries
       UCG can boast the most extensive
       network in the region.

      Each bank is able to provide a
       complete range of real estate products
       and services for mortgage loans as well
       as commercial real estate projects.

      The financing solutions are tailor made,
       combining local market knowledge with
       international financing expertise.




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     Mortgage Market: Position of the Group‘s banks in CEE




                                                           UniCredit Group Mortgage Market Share in CEE

                                   40



                                   35



                                   30
        Market Share by End 2007




                                   25



                                   20



                                   15



                                   10



                                   5
                                            1         1        1       4         4        5         1             8         3             5          5
                                   0
                                        POLAND   CROATIA     BiH   TURKEY   CZ       SK       BULGARIA   RUSSIA       ROMANIA   HUNGARY       SLOVENiA




                                             = market position

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     Mortgage Market: UniCredit Group is a leading regional player


        Positioning
        Market share
                                                              New volumes 2008-2010
         in Q4 2007                                       =
                                                              (EUR bn)
             40.0

                             Croatia
             35.0


             30.0

             25.0
                                       Bulgaria
             20.0
                         Poland
                                                                             Ukraine

             15.0
                             Slovenia        Romania
             10.0                Czech R.                           Turkey
                        Slovakia
              5.0                      Latvia                                            Russia
                     Hungary                    Lithuania
              0.0
                    0%       10%        20%         30%       40%        50%           60%    70%   80%
                                                                                                    Market potential
                                                                                                    LC CAGR ’08-’10


       All UCG countries of presence in CEE are of strategic importance for the mortgage business
       Russia, Ukraine, Poland and Turkey key markets for future growth

23   Source: UniCredit Group CEE Research Network
     Real Estate: a fast moving business segment


                                                 Commercial Real Estate in Central
       Financing Volumes of UniCredit Group
                                                  Eastern Europe is one of the most
                by Segment in CEE
                                                  active business segments, with double
                   Industrial
                                                  digit growth rates in countries such as
                     11%                          Russia, Romania and Bulgaria
                                       Office
                                       34%

     Residential                                 UniCredit Group is supporting such
        18%                                       important growth, with total financings
                                                  in the region expected to be in excess
                                                  of € 10 bln at the end of 2008 (ca +60%
                                                  yoy)



                                                 A substantial growth is foreseen for all
               Retail                             the segments (residential, office, retail
               37%                                and industrial/logistic) in the
                                                  development markets, while for the
                                                  mature ones the driving forces will be
                                                  mostly the residential (ca +70%) and
                                                  industrial (more than doubling yoy)
                                                  segments.
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     Real Estate: some examples of what we do




                                    Odessa Logistic Park
                                    Built in a joint venture programme with
                                    Akron Group and GLD Invest Group.

                                    Phase 1: 54.900 m² area for offices and
                                    warehouses

                                    Project Size: 3 phases, finished in 2010
                                    with a total area of 170.000 m²



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     Conclusions


      Supply gap: the CEE residential real estate market is still characterized by a
       quantitative and qualitative supply gap, despite the strong growth in new buildings
       recorded in the last years
      Dwelling demand: the demand for residential real estate is strong and on top of the
       existing demand, there might be a "potential demand" at the moment constrained by
       affordability issues
      House prices: Increases in house prices have been significant in the last years. We still
       believe that house prices in the region are compatible with an equilibrium level.
      Outlook: Looking ahead, despite a less supportive macroeconomic scenario, we keep a
       positive view. We forecast some moderation in growth trends, but no backlash, as gap in
       supply coupled with persistently lively demand represent a long term driver
      There are however a few areas to monitor which might exhibit some oversupply
      Supportive: As UniCredit Group we recognize the residential real estate market
       potential in CEE. We are actively supporting the development of the market, both at the
       retail level, being a major player in the mortgage market, and at the developers level,
       with a dedicated structure


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