European investors show greater appetite for risk as outlook improves: survey

A greater appetite for risk seems to be emerging among European investors, according to Union Investment's latest investment climate index.

European investors are moving away from their traditionally strong focus on security as they feel that the general economic outlook for Europe has improved compared to the previous year, the survey found.

Only 30% of investors now expect a Europe-wide recession, compared to 42% previously. Similarly, only 3% now regard the collapse of the eurozone as a serious possibility.

Union Investment polled 165 investment decision-makers in Germany, France and the UK for the survey.

The company's Investment Climate Index, which captures the expectations of property investors in the three largest European economies, rose by around one point in Germany and the UK to 67.9 and 64.9 points respectively. From a low starting point in France, the index climbed five points to 64.2. This means that the index shows an upwards trend in all three regions for the first time in three years.

Investors stated unanimously at the start of the year that capital requirements for property investment projects will tighten further as a result of the euro crisis. Around 70% of investors expect loan rates to rise, accompanied in France by the threat of higher taxes.

'In view of the ongoing difficult conditions in the credit markets, it’s hardly surprising that European investors see little scope for opportunistic investments in their current strategies,' said Reinhard Kutscher, chairman of the management board at Union Investment Real Estate. Around 85% of those surveyed believe that the euro crisis will lead to an even stronger focus on core products.

While marking down the southern European peripheral countries, investors anticipate positive economic performance for most investment regions in the European Economic Area (EEA). In addition to Germany, investors believe that property markets in Poland, Turkey and Ireland will emerge stronger from the current cycle.

The survey additionally reveals that investors' strong focus on core products plays into the hands of the German property market. 'Even the spectre of an emerging transfer union in Europe does not appear to be having an effect,' added Kutscher.

Almost 90% of German investors are convinced that even if substantial transfers from Germany to the peripheral countries in southern Europe become a permanent feature, Germany will remain a 'safe haven'.