EUROPE – Pricing of commercial property in Europe has become more attractive in the last three months as falls in bond yields cut the returns required for real estate, according to DTZ.

The property services firm's Fair Value Index for the third quarter of this year saw the score for Europe rising to 62, up from 53 in Q2.

Fergus Hicks, head of European forecasting, said: "The past few months have seen sentiment over the European economy and the property market continue to oscillate."

But the announcement by the European Central Bank that it would support the bond markets of troubled economies, along with comments by the bank's president Mario Draghi that he would do whatever it took to the save the euro, had been positively received, Hicks said, and bond yields had fallen.

"The upshot is that commercial property now looks more attractive as an investment proposition, and our fair value index score has risen accordingly," he said.

Country-by-country figures revealed that the UK and German markets were the most attractively priced, said Matthew Hall, global head of forecasting at DTZ.

This reflected the reasonable returns being expected on property compared with ultra-low government bond yields, he said.

"France looks to be around fair value, while property in the troubled economies of Spain and Italy, on the other hand, looks overpriced for the most part," Hall said.

Ireland was an exception, however, with good progress on the economy having seen bond yields tumble, falling nearly 150 basis points between the second and third quarters.

"Furthermore, Dublin rents are forecast to show strong growth by 2017, rising 20% for retail, 25% for offices and 36% for industrial," he said.

The result of this was that Dublin office, retail and industrial property were all rated as 'HOT', according to the DTZ Fair Value index, and as such, offered good investment prospects, he said.

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