The global credit crisis is starting to weigh on investment performance in the property sector, according to DTZ's latest European Quarterly research report. The global property consultant forecasts a drop in activity of 15% to 20% in the third and fourth quarter of the year, compared to the record EUR 48 bn and EUR 53 bn registered respectively in the first and second quarter of 2007.
The global credit crisis is starting to weigh on investment performance in the property sector, according to DTZ's latest European Quarterly research report. The global property consultant forecasts a drop in activity of 15% to 20% in the third and fourth quarter of the year, compared to the record EUR 48 bn and EUR 53 bn registered respectively in the first and second quarter of 2007.
Research by the consultant across Europe shows that there is not much space for positive sentiment across the European real estate markets, where deals continues to be put on hold or scrapped as a result of new conditions in the credit market.
DTZ expects a general reassessment of risks taking place across the European real estate markets in the long term, which will eventually lead to a re-pricing of property in secondary or emerging markets as well as alternative real estate. DTZ's head of research Joe Valente suggests there could be a 'massive' shift to high-quality real estate because investors are ready to pay more for financially strong partners and stable rental incomes. Cross border transactions are forecast to increase to 53% in the coming six months from 35% in the first half, reflecting investors' hunt for more value outside their home markets.
As banks have become more careful in lending money, it will become more difficult for highly-leveraged players to maintain their targeted returns. But the yield correction could benefit other players, in particular investors in shares, such as pension funds and life insurance firms, according to Valente. These investors, which make use of less debt than other parties, could find increasing investment opportunities in the changed market conditions.
With uncertainty hanging over the markets for rest of the year, investors are holding out to see how the situation develops. But DTZ International's managing director John Slade is confident that the situation will stabilise next year. 'I am convinced that 2008 will mark a new start,' he says.