Real estate demand in Europe is weakening at the same time as the investment climate is deteriorating 'significantly'.
These are some of the main findings of a recent Union Investment survey of 150 property companies and institutional real estate investors in Germany, France and the UK.
On a positive note, the survey indicates that returns on existing stock remain stable.
Despite an increase in interest rates, 50% of European real estate investors are sticking to their investment strategy, 39% plan to invest less over the coming 12 months, while only 3% claim they will stop purchasing property altogether.
Olaf Janßen, head of real estate research at Union Investment, commented: ‘The long era of ultra-low interest rates ended abruptly at the start of the second quarter. Naturally, this also affects the real estate markets. In theory, a combination of rising interest rates and declining demand should cause real estate prices to fall significantly. But that has not been the case across the board, at least up to mid-2022. European real estate investors are evidently still in a pricing phase.’
The survey also found that European real estate investors are feeling pessimistic about the future of the economy, energy prices, and interest rates.
The Real Estate Investment Climate Index compiled by Union Investment in Germany, France and the UK has fallen in all three countries.
The barometer has dropped the most in France, by 8.8 points to 60.3 points in H1 2022, followed by Germany, by 4.3 points to 59.7 points, and the UK, by 3.2 points to 65.6 points.
