EUROPE – Real estate investors in Europe are slowly regaining confidence and plan to increase investment in 2013, but a desire for healthy returns could be reined in by shrinking credit markets, according to a survey.
Union Investment’s latest property investment climate study shows a clear upward trend in confidence for Germany, France and the UK for the first time since 2010, with Ireland surprisingly emerging on investors’ radars.
In addition to Germany, investors are also anticipating real estate markets in Poland, Turkey and Ireland to emerge stronger from the current cycle.
However, investors still voiced concern that capital requirements for property investment will tighten further as a result of the euro crisis, with 2013 expected to be marked by tough competition in north European property markets.
Around 70% of investors expect loan rates to rise, with the threat of higher taxes in France an added burden.
The study involved a representative survey of 165 investment decision-makers in Germany, France and the UK.
"In view of the on-going difficult conditions in the credit markets, it’s hardly surprising that European investors see little scope for opportunistic investments in their current strategies,” said Reinhard Kutscher, chairman of the management board at Union Investment Real Estate.
Some 85% of the real estate professionals surveyed believe the euro crisis will lead to an even stronger focus on core products, such as those with long leases, central locations and high quality assets.
At the same time, a greater appetite for risk appears to be emerging among European investors, hinged on the fact that many feel the general economic outlook for Europe has improved somewhat.
Only 30% investors now expect a Europe-wide recession, compared with 42% when the survey was last conducted. Fears whether the euro-zone will collapse are dissipating, with only 3% regarding it as a serious possibility, compared with 12% previously.
Investors' focus on core products is particularly noticeable in the German property market. “Even the spectre of an emerging transfer union in Europe does not appear to be having an effect,” said Kutscher.
Almost 90% of German investors are convinced that Germany will remain a safe haven even if substantial transfers to the peripheral countries in southern Europe.