ECB measures boost attractiveness of European property: DTZ

The European commercial property market looks better value in Q3 with the DTZ Fair Value Index score for Europe rising to 62 from 53 in the previous quarter. The rise was attributed to falls on bond yields in the wake of the European Central Bank announcement that it will support bond markets of troubled economies.

The all-property DTZ Fair Value Index offers insight into the relative attractiveness of current pricing in the European property markets. According to the index, Germany and the UK now offer the most attractive property investment opportunities, with 15 UK and 5 German markets classified as hot. In the troubled economies of Spain and Italy, on the other hand, DTZ classified the majority of markets as cold.

Dublin stands out as a particularly attractive market, with office, retail and industrial property all classified as hot. This is due to steady progress being made on the economy and bond yields tumbling by nearly 150 bps over the past quarter.

Fergus Hicks, Head of European Forecasting at DTZ, said: 'The past few months have seen sentiment over the European economy and the property market continue to oscillate. However, the announcement by the European Central Bank that it will support the bond markets of troubled economies, along with comments by Mario Draghi that he will do whatever it takes to the save the euro, have been positively received, and bond yields have fallen. The upshot is that commercial property now looks more attractive as an investment proposition, and our Fair Value Index score has risen accordingly.'

Matthew Hall, Global Head of Forecasting at DTZ, said: 'The big picture is that European commercial real estate looks better value now than three months ago. Drilling down into the figures reveals that the UK and German markets are the most attractively priced, reflecting reasonable returns being expected on property compared to ultra low government bond yields. France looks to be around Fair Value, while property in the troubled economies of Spain and Italy, on the other hand, for the most part looks overpriced. Ireland is an exception; good progress on the economy has seen bond yields tumble, dropping nearly 150bps between Q2 and Q3. Furthermore Dublin rents are forecast to show strong growth by 2017, rising 20% for retail, 25% for offices and 36% for industrial. The result is that Dublin office, retail and industrial property are all rated as hot according to the DTZ Fair Value Index, and as such offer good investment prospects.'