Price correction pending in major European cities - DTZ

Spain is probably the next European real estate market to undergo a price reduction, according to property advisor DTZ. 'But I think markets such as France and Germany are fairly static at the moment, as vendors there have not accepted there has been a move in pricing,' John Slade, managing director of International Investment comments at DTZ, has told PropertyEU on the first day of the MIPIM trade fair.

Slade suggested in a report issued in February that ‘green shoots’ of recovery were already appearing for the European property sector, and the initial affect of the credit crunch had passed. But speaking to PropertyEU’s Web TV team, Slade emphasised: 'I don’t think the credit crunch has actually stopped, and I think there is more bad news to come out financially and economically - with the US definitely going into recession and the UK slowing down. I think in terms of property the initial effect to has been seen.'

Slade said property yields in London had moved down 100 basis points, with prime yields in the West End as low as 3.5% and 4.5% in the City of London. But in recent weeks the London market is becoming more liquid. 'Now a prime West End building - not that there is one available - is at 4.5% plus. The sale of well-let buildings on long leases in Central London are reflecting initial yields of 5.25% to 5.5%,' he said.

'There have been deals in Warsaw and Prague recently at the same sort of yield, so London in terms of pricing looks very cheap,' Slade said. 'If you are buying at the same price in Central and Eastern Europe I don’t think the risk premium is there. London looks very good value and I would expect other major European capital cities to follow suit.'