EUROPE – European real estate transaction volumes will increase in 2013 as the continuing euro-zone crisis stimulates – rather than deters – activity, according to Ernst & Young's annual survey of 500 investors.

In a reversal from last year's survey, which found the majority of investors expected the crisis to reduce activity, 83% of those surveyed now expect an increase in transaction volumes, and 74% expecting an increase in the average deal size as more international investors scout European markets.

Investors in some European markets have become what the authors described as "exceptionally bullish".

In France, 83% of investors surveyed believe macro misery will drive increased investment.

More cautiously, in Sweden, 54% now expect it to result in an increase in investment, compared with 86% who last year thought it would dampen market activity.

The researchers attributed broad bullish sentiment to investors' perception that a breakup appears less likely this year than last as a result of measures taken by central banks and the likelihood of a European banking union.

Despite consensus over the broad euro-zone forecast, researchers found significant diversity of investment priorities in specific markets, with the distinction between euro-zone and non-euro-zone markets replacing that between mature and emerging markets.

The main market beneficiaries of the increase in activity will be non-euro-zone 'safe havens', notably the UK – identified by more than 90% of those surveyed as 'attractive' or 'very attractive'. 

"There is a notable trend that non-euro-zone-countries are particularly attractive," said the report, noting strong positive domestic sentiment for Sweden, Turkey and Luxembourg.

Yet the strongest sentiment came from Poland, with equal numbers (45%) of investors identifying their domestic market as 'attractive' and 'very attractive'.

Open-ended funds and banks are likely to be the most active sellers, according to more than 40% of those polled.

More than 80% of investors expected the most active buyers to be private equity and opportunistic funds, and family offices, not least because the lack of debt funding will continue to act as a barrier.

Investors blamed regulation, especially Basel III, for making lending less attractive, but a similar percentage of UK respondents expected Solvency II to encourage insurers and pension funds increasingly to provide debt.