The European Central Bank’s recently announced €1.1 tln quantitative easing programme for the eurozone has increased the attractiveness of European property relative to bonds, according to DTZ’s latest Fair Value Index.

The European Central Bank’s recently announced €1.1 tln quantitative easing programme for the eurozone has increased the attractiveness of European property relative to bonds, according to DTZ’s latest Fair Value Index.

The quarterly barometer of European property markets saw the overall index score rise by three points to 79 in the last quarter of 2014, meaning that commercial property has become more attractive to investors.

The QE programme, which is scheduled to run until September 2016, is expected to drive down bond yields and interest rates, making property an increasingly appealing option for investors, said Fergus Hicks, DTZ’s head of global forecasting.

‘The fall in bond yields and forward rates that the ECB’s QE programme has triggered lead us to expect that the property market will continue to look good value in the first half of 2015,’ he said. DTZ researchers expect the attractiveness of European property to weaken from the second half of this year, however, as property yields decline.

Within the region peripheral markets such as southern Europe and the Baltics are seen as offering better value than mature economies such as the UK, Germany and Sweden, where the market is close to fully priced.

Magali Marton, DTZ’s head of research for EMEA, said: ‘To find attractive investment opportunities investors need to look to southern Europe, the CEE and Baltic markets where yields remain higher and economies are recovering. We believe that on current pricing the Spanish market presents particularly attractive opportunities for property investors.’

The industrial sector is seen as most attractive, with Madrid industrial rated as the most underpriced market in Europe in Q4, followed by Copenhagen, Barcelona and Riga industrial.

The bottom end of the table was dominated by two countries with very different outlooks: extremely low property yields in the Swiss office market have frozen investors out of Zurich and Geneva, while Russia’s volatility and the falling rouble have severely weakened demand for Moscow’s office and retail markets.

The DTZ European Fair Value index compares and ranks the attractiveness of current property pricing across 117 European markets. A score of 100 indicates that all markets are underpriced, while zero means that all markets are overpriced.

In Q4 2014 76 markets were rated as underpriced, 33 fairly priced and eight as overpriced.