Will the euro collapse or will the EU become a transfer union? Since the outbreak of the debt crisis, the real estate sector has considered a whole range of scenarios. While the vast majority of European real estate investors expect the eurozone to survive, the debt crisis and the uncertainty surrounding its consequences for European real estate markets continue to create headwinds for investment in Europe’s three largest economies. That is the finding of the latest investment climate study from Union Investment, which involved a representative survey of 172 investment decision-makers at real estate companies in Germany, France and the UK in the second quarter of 2012.
The survey showed that just 12 per cent of the real estate investors polled believe the break-up of the eurozone is a likely scenario. Having said that, a further decline in expectations of an economic recovery in Europe more than justifies an adjustment of investment strategies. The survey showed that the proportion of investors who anticipate a Europe-wide recession is currently 42 per cent – up five percentage points on the corresponding figure from the last survey in December 2011. As a result of the euro crisis, around 90 per cent expect financing banks to impose tougher capital requirements, with over 80 per cent anticipating a greater concentration of real estate investment on the stable markets of northern Europe. A total of 65 per cent expect a significant decline in new-build activity as a result of the debt crisis.
Management of letting risk becoming more important
“Investors also remain concerned about a new credit crunch, although the situation has eased somewhat,” says Olaf Janssen, head of property research at Union Investment Real Estate GmbH, Hamburg. Today, a new credit crunch is a likely scenario for 62 per cent of German, British and French real estate professionals, compared with 72 per cent in December 2011.
Accordingly, when asked about different types of risk investors believe liquidity risk is slightly less significant than six months ago. For the first time, it is now letting risk that takes centre stage when making investment decisions, at 83 per cent of the responses (+2 percentage points), followed by rent default risk with 72 per cent (-2 percentage points). “Due to ongoing economic uncertainty, demand for space remains the crucial factor in investment decisions. Investors are primarily interested in office markets with low downside potential,” says Janssen.
High level of confidencein the German property market
Against this backdrop the real estate markets in Canada, Scandinavia, Poland and the USA rank alongside Germany as the most popular with investors. The Union Investment study showed that a total of 56 per cent of investors – seven percentage points more than six months ago – believe the German real estate market will emerge stronger from the current crisis. Around 40 per cent of investors expect the Polish commercial property market to come through the debt crisis stress test well (December 2011: 38 per cent), while 37 per cent expect the same of Sweden (29 per cent) and 31 per cent of Switzerland (25). The investors surveyed unanimously rank Spain as the riskiest market over the next two to three years. “The economic outlook spells even fewer opportunities for real estate investment. Security is likely to play an increasingly key role in investment decisions for many investors in the coming months,” says Olaf Janssen. In the latest survey, 44 per cent of investors cited returns as the main investment motive, followed by security for 35 per cent and liquidity for 13 per cent.
Investment Climate Index in France falls to all-time low
The reduced expectations for economic growth across Europe are reflected in Union Investment’s real estate Investment Climate Index. The national indices measured in the three regions remain significantly below the 70-point mark which signifies a friendly investment climate. In Germany, the downward trend since the second quarter of 2011 continued, with a fall of one point to 66.7 points – the country’s second-lowest value since 2009 (66.1 points). In France, the index also dropped by one point to 59.2 points – an all-time low since the first survey in 2005. With an improvement of 0.9 points, the UK made slight progress following a significant drop, reaching 63.8 points.
About the Union Investment survey:
Union Investment launched its Investment Climate Index of European property investors in 2005, with the survey taking place at six-month intervals since spring 2008. The index is based on four indicators: market structure, the general environment, location factors, and expectations, each with a weighting of 25 per cent. For the index, market research institute Ipsos conducted 20-minute telephone interviews in June and July with 172 representative property companies and institutional real estate investors in Germany, France and the UK.
Fonte : CS della Società