European real estate investors are entering 2019 with 'subdued expectations', according to new research from property investment firm Union Investment Real Estate.
The study, which polled 150 real estate investors in Germany, France and the UK found that 41% of property professionals expect the real estate investment climate to deteriorate over the next twelve months, while only 22% expect a noticeable improvement.
'The subdued expectations of European real estate investors for 2019 suggest that professional investors are very aware of the challenges and risks inherent in a late-cycle market and are unwilling to experiment,' said Olaf Janßen (pictured), head of real estate research at Union Investment. 'For the real estate industry as a whole, this can be seen as a positive indication of conscientious risk management.'
An investment strategy that accepts a lower return for the same level of risk is correspondingly popular in the current market environment, the survey found. Around half of German and French real estate professionals are pursuing such a strategy, rising to 86% of professional investors in the UK.
Regional differences
While around half of property investors from Germany and the UK rate the outlook as negative, the most optimism can be found in France. Around 40% of French respondents expect a noticeable improvement in the investment climate; only 24% are preparing for a slowdown.
The survey participants were also asked which European countries they saw as offering the best overall conditions for real estate investment in 2019 across all property types. At 31%, Germany was the most-named country here. France and the UK followed a long way behind, each garnering around 13%. Spain, the Netherlands, Sweden and Austria are also seen as offering good conditions for investment in 2019.
'The survey revealed that investors intend to focus very much on their own home markets. At the same time, Germany’s strong position relative to other European property markets is clearly apparent,' said Janßen. 'One in three professional investors in France and one in five of their British counterparts name Germany as their market of choice in 2019.'
Beyond Europe
Among non-European markets, the US remains the clear leader, with 53% of all respondents with a correspondingly broad investment remit citing the US as their favourite country for real estate investment outside Europe. By contrast, Australia and Japan barely register on European investors’ radar, at 13% and 10%respectively.
'Due to higher hedging costs, European real estate investors are likely to be less active in the US in 2019 than in previous years. Given the similarly difficult conditions in other international markets, the US markets nonetheless retain their stand-out importance,' added Janßen.
The relatively low expectations of European property investors for 2019 are also reflected in the overall index. Compared to the survey conducted a year ago, the investment climate index for Germany has declined to 63.2 points (minus 4.1), France stands at 66.8 points (minus 2.3) while the UK scored 60.1 index points (minus 3.5).
