Europe's main residential property markets are in a 'supercycle' of high demand offset by slow-growing supply, according to a new report published by Catella.
The European residential real estate sector stands out as the decade’s best performer, despite the existence of substantial differences in yields and drivers between different regional markets and cities. Demand has rocketed in the past 24 months, and at present there is no discernible end in sight. Residential investment came to a total of €37.5 bn in 2015, the report found.
Catella said that no matter what country or city examined, it is clear that investments in residential property are subject to increased levels of demand, leading to continuously rising prices.
Thomas Beyerle, head of group research at Catella: 'Europe has seen two simultaneous developments that have set the stage for what is known as a “supercycle”. Rising liquidity has coupled with a rate of urbanisation that can almost be described as dramatic, over more than 10 years. Together, these have produced the current situation in European residential markets, in which high demand contrasts with comparatively slow-growing supply. But one must also take into account that national residential markets are very much subject to national politics.'
Cities like London, Paris, the Swiss metropolitan regions and German cities such as Munich, Hamburg and Stuttgart are very popular, resulting in high rental prices. But the growth in rental prices is struggling to compensate for the increase in purchase prices, resulting in yield compression and confining rental yields to between 3% and 4%. This is pushing some of Germany’s and France’s category B and C towns, with rental yields of up to 6%, into the limelight, the report concluded.
Similar results have also been seen in Polish cities such as Warsaw, Gdansk and Lódz. This trend will be carried by stable Polish economic growth over the medium and long term. Transaction activities have recently increased in Spain, although it remains to be seen whether this development is sustainable, Beyerle added.
Entitled Catella Market Indicator – Residential Europe 2016, the report analyses 18 investment locations in Europe, and draws on a large number of criteria, including economies, demographics, regulation, residential property markets and finance.
The Catella Market Indicator – Residential Europe, Spring/Summer 2016 is available at www.catella.com/research
