Worst year yet looms ahead, Emerging Trends warns

2012 will be the toughest year yet for Europe’s real estate market as it continues to grapple with the economic and political uncertainties spawned by the euro crisis and the 'new normal' following the fallout from the collapse of Lehman Brothers.

That is the grim message contained in this year’s edition of the annual Emerging Trends report published by the Urban Land Institute and PricewaterhouseCoopers.

With zero growth or recession looming, 2012 will be characterised by more negatives than positives, the report predicts. As the banking sector comes to terms with structural shifts, the availability of property finance in 2012 will remain tight for most. And because of the scarcity of traditional debt providers, the need to find alternative sources of funding will become imperative.

But despite forecasts of a lost year and possibly even a lost decade, many Emerging Trends interviewees believe 2012 could be the year investors have been waiting for: the era of ‘pretend and extend’ is coming to an end as banks come under growing pressure to find a solution for the property loan books.

‘Their need to deleverage, coupled with an environment in which new debt will be significantly less than before, is likely to create increased opportunities for those with the equity to deploy and, importantly, the requisite skills,’ one interviewee said.

Whether investors will get the bargains they are aiming for remains to be seen as investors and banks claim they will stick to their guns over pricing. Whatever the outcome, distressed sales will be a more prominent feature of the market this year than last. Or as one interviewee put it, ‘The banks were waiting for a better day, and there isn’t going to be a better day.’

A full analysis appears in the January/February issue of PropertyEU. Click on the link below to subscribe