The correction of the European investment market was already at work by the time the US subprime crisis hit European banks in August, Atisreal said in a new report published on Monday. Initial prime yields had already stopped falling in the priciest markets in spite of the abundant capital seeking to invest.
The correction of the European investment market was already at work by the time the US subprime crisis hit European banks in August, Atisreal said in a new report published on Monday. Initial prime yields had already stopped falling in the priciest markets in spite of the abundant capital seeking to invest.
Yields have been flat since Q2 2006 in London and Barcelona and since Q4 2006 in Madrid. Prime yields have bottomed out and they may well start to rise again by the end of the year. The subprime crisis has triggered this move and accelerated the correction, which now stands at 50 basis points in Germany and the UK, Atisreal said.
UK property suffered a 1.6% fall in value in September, the largest single monthly fall since May 1990. This reveals the speed of the adjustment in the UK market. The French market stands out: in Paris and the main regional cities, initial yields did not budge in the third quarter. A correction in line with the rest of Europe should therefore occur in the last quarter in Paris, while a further fall in yields is expected in Lyon, Lille and Aix/Marseille.
Until now, trends in the various countries have been fairly convergent. This is unlikely to last as the adjustment will have varied consequences in different countries, depending on their economic situations. In this respect, Germany appears to be in a stronger position than the rest, largely thanks to the very swift correction in prices.
Over the first three quarters of 2007, trading volumes stood at EUR 70 bn, representing an increase of 29% on the same period in 2006. The busiest markets are those in German cities followed by Brussels, London, and Paris. Conversely, there have been fewer deals in Spanish markets and the larger French cities.