EUROPE - UK investors considering European properties are "brave", as these only appear fair value and are in fact expensive investments for pension funds due to the current exchange rate, Fidelity Investments has argued.

Speaking at the SPS Property Investment Strategies conference in London yesterday, the company's head of European real estate research Matthew Richardson suggested that, instead of buying properties on the Continent, schemes should consider holdings in the UK's regions, as it was unwise to export sterling in the current climate.

He said investors would be offered a "huge opportunity" as the UK property market began to open up beyond central London as a result of falling yields, something Richardson expected to occur from the end of the year.

"The euro-zone looks fair value, but it's expensive if you're coming from sterling at the moment," he said. "It is a very expensive time to be moving capital direct assets that are denominated in dollars or euros."

Richardson also said increased interest in the German market over the past few months was purely motivated by currency concerns.

"What we're seeing is the peripheral investors within the euro - pension funds in Ireland and pension funds in southern Europe - are moving their fixed asset allocation of property into Germany and Benelux [countries]," he said.

He argued that currency movements, rather than concerns over sovereign debt, were at the "heart" of the current crisis.

"I know everyone is thinking 'debt', but debt is a function of manipulation of currency rates over the last 15 years, either by predatory interest rate policies by governments and central banks, or by direct manipulation, such as the US dollar or the renminbi," he said, adding that he remained "very, very concerned" about the Chinese market.

Richardson, speaking at a seminar outlining the basics of real estate investment, also stressed the importance of examining the structure of the cash flow in each property holding, saying it was important to be letting to companies working in current economic growth areas.

"In our own fund, for instance, we pretty much have a blanket ban on bulk retailers - book shops, anyone involved in the music and CD sales industry," he said.

He conceded that, while at first this may sound obscure, his view was that such business models were no longer viable.

"If you're taking a 10- year view on property or a 5-7 year hold, a lot of those companies are not going to be there," he said.