Europe will continue to benefit from its status as a ‘safe haven’ for property investors in 2016 amid political turmoil and the slowdown in emerging markets, according to an analysis by Savills Investment Management.
Europe will continue to benefit from its status as a ‘safe haven’ for property investors in 2016 amid political turmoil and the slowdown in emerging markets, according to an analysis by Savills Investment Management.
Savills said the Federal Reserve’s decision to raise interest rates in the US would have a positive effect on real estate markets in Europe and Japan, where quantitative easing is set to continue for at least another 12 months.
Kiram Patel, chief investment officer at Savills IM, said: ‘Strong headwinds mean that we are continuing to see strong demand for core investment product. Given low prime property yields and the shortage of prime investment product, we expect investors to increasingly target secondary property in the best markets. A movement up the risk curve is required for better risk-adjusted returns.’
The prospect of a ‘hard landing’ in China, where economic growth slowed to a 25-year low of 6.9% in 2015, pressure on emerging market currencies and the geopolitical tensions in the Middle East have triggered a flight of capital from these regions into European property markets.
Savills IM said optimism was tempered by downside risks such as falling oil process, which could lead sovereign wealth funds to slow down their acquisition of real estate assets, and yield compression in gateway cities such as London and Paris.
