France’s BNP Paribas REIM has painted a picture of how stagflation and investor sentiment is affecting the European real estate market.
The firm’s H2 2023 market outlook states European real estate markets are ‘still responding’ to higher financing costs and price adjustments that began at the end of last year.
BNP Paribas also suggests continued downward pressure until the end of the year at least. It stated: ‘The current level of pending deals does not suggest that market activity will pick up in the short term and the price discovery phase could extend further into 2023. Moreover, yield rises may continue until the end of 2023 when central banks should stop tightening their monetary policies.’
Laurent Ternisien, chief client officer, said the new environment that began at the end of 2022 delayed the recovery of the European real estate market, as it influenced both financing conditions and investor sentiment.
‘Investors are adopting new strategies to adapt and diversify their portfolios. They need to focus on more liquid markets and sustainable assets, as well as property types driven by macro trends that are immune to the current context such as an ageing population, urbanisation and greater household formation.’
More liquid markets and certain sectors such as healthcare are highlighted.
‘The healthcare market especially, benefits from good long-term prospects for demand driven by macro trends that should not be affected by the current economic slowdown, such as an ageing population or increase of chronic diseases.’
‘In addition, logistics and hospitality represent high risk/return options or investors. A resurgence of discretionary spending on experiences should benefit hospitality and in particular hospitality focused on health and wellbeing such as yoga, meditation or spa resorts and nature-based tourism, including camping.’
