The introduction of REITs will ensure the UK continues as Europe’s principal real estate market, according to property firm DTZ – despite a predicted slight fall in investment from €71bn to €65bn in 2006.
In 2005 the UK accounted for capital flows of €221.6bn – 46% of the European total according to DTZ’s Money into Property report, published last week. The report attributes investment inflows to a combination of energetic cross-border activity and large corporate transactions. Irish investors accounted for 22% of the €17.9bn in UK acquisitions by foreign investors.
The report claims globalisation of the real estate market reflects recognition of its emergence as a separate asset class. New routes to market – including listed securities, unlisted funds and derivates – will in 2006 “become firmly established, serving to meet investor demand for product and offering a truly capital markets approach to the real estate sector”.
Specifically, the increasing importance of the derivatives market as a means for lenders to hedge could mean the indirect market “could ply a much more important role in years to come” – even rivalling the direct investment market.