Fidelity warns against ‘rushing back’ into Spain and Italy

European property values are expected to continue their recovery in 2014 but investors should not race back into ‘peripheral’ eurozone markets, global asset manager Fidelity warns in an outlook for 2014.

‘The euro crisis is not over yet and growth will certainly not be uniform across all European property markets. It is still too early to be rushing back into so-called “peripheral” eurozone markets, particularly Spain, Italy and Greece,’ it says.

Fidelity notes that some European real estate markets like Ireland have been ‘under-appreciated’ in recent years, but economic conditions are starting to improve. This upturn will benefit European real estate as appetite improves across the region.

The asset manager also predicts the recovery in property values to spread from prime pockets to high-grade secondary and regional markets. This shift will be evident in the UK in particular where Fidelity foresees double-digit total returns on high-quality secondary real estate. Capital growth is expected to form the bulk of returns while recurring income should continue to deliver around 6-8%.

Across the eurozone as a whole, banks’ willingness to lend against good-quality property assets should promote sustainable recovery in the property market, it says.

‘Risk aversion is gradually being replaced by risk appetite, and 2014 looks set to be a strong year for European property markets,’ says Fidelity.

Fidelity Worldwide Investment provides asset management services to investors all over the world outside the US and Canada. It offers a wide range of funds to investors and currently manages over $260 bn (€189 bn) for private individuals and institutions.