EUROPE – Intensifying competition in Europe’s major real estate markets is leading to renewed interest in periphery markets such as Spain and Ireland, as investors search for returns.

Research conducted by the Urban Land Institute (ULI), a non-profit research institution, and accountants PwC found 71% of property investors felt there was a shortage of assets.

They said this would lead to a moderate to significant impact on their business over the coming year.

The majority (59%) also said assets in Europe’s prime markets were now overpriced.

As a result, along with Ireland and Spain, interest is growing in regional cities and secondary property.

Around half of respondents (51%) now class Ireland as a good buying opportunity, despite being no-go area only two years’ previous.

Dublin rose 18 places in the rankings of property investment in European cities, going from 20th to second.

Two-thirds of respondents (67%) believe there are good buying opportunities in Spain.

However, countering this are arguments of a lack of available debt in the region, and warnings of investment before the economy returns to growth.

The struggle to find high-yielding core assets in major markets is also leading to some investors taking on development.

Some 71% of respondents said they thought development was now an attractive way to acquire prime property.

The research showed a growing interest in secondary cities, and the acquisition of income-producing assets.

Also, an interest in secondary property in core markets was found to be on the increase.

Half of investors suggest capital flows will remain strong, with the availability of debt to increase.

Only 15% said it would decrease.

Around 71% believe using equity for refinancing or new investments will be a popular source of capital.

Investment is expected to flow from Asian sovereign wealth funds, the research said.

The resurgence of Ireland and Spain will be 2014’s talking points in real estate, said Joe Montgomery, ULI Europe’s chief executive.

He said opportunistic investors in Spain were now being followed by mainstream institutions.

“However, with limited signs of tenant demand and rental growth, questions remain as to how far the market recovery can go,” he said.

“Investor appetite in Dublin has been growing over the past 12 months, with significant volumes of international capital chasing the best assets.”