EUROPE - The sovereign debt crisis and the uncertainty surrounding its consequences for European real estate markets continue to create headwinds for investment in Europe's three largest economies, according to a survey by Union Investment.

The survey of 172 managers across Germany, France and the UK showed that just 12% of real estate investors believe the break-up of the euro-zone is a "likely" scenario.

The survey also found that 42% of investors currently expected a Europe-wide recession, an increase of five percentage points over the last survey conducted in December last year.

As a result of the euro crisis, around 90% expect banks to impose tougher capital requirements, while more than four in five anticipate a greater concentration of real estate investment in the stable markets of northern Europe.

In addition, nearly two-thirds predict a "significant" decline in new-build activity as a result of the debt crisis.

Olaf Janssen, head of property research at Union Investment, said: "Investors also remain concerned about a new credit crunch, although the situation has eased somewhat."

A renewed credit crunch presented itself as a likely scenario for 62% real estate professionals, down from 72% only six months ago.

Investors nonetheless remain confident about the German property market, believing it will emerge stronger from the current crisis, while most see opportunities in Canada, Scandinavia, Poland and the US.

A number of other surveys conducted over the recent months have revealed investors' appetite for Europe's three largest real estate economies: France, Germany and the UK.

In June this year, data published by DTZ showed that France, Germany and the UK accounted for 74% of European second-quarter transaction volumes as Europe became a target for inter-regional investors insulated from the debt crisis.

"The economic outlook spells even fewer opportunities for real estate investment," Janssen said. "Security is likely to play an increasingly key role in investment decisions for many investors in the coming months."