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Real Estate Asset Investment Indicator - Market drivers - EY - United Kingdom

Real Estate Asset Investment Indicator

Market drivers

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Respondents are split down country lines as to how inflation and Eurozone instability will impact real estate assets.

Inflation concerns vary across Europe

Inflation levels in many European countries are around 3% with certain markets such as Russia substantially higher at around 7%.

Inflationary concerns will drive real estate asset investment 

As a consequence, two thirds of respondents to our survey believe that further inflationary pressures will drive investment in real estate assets in the medium term. This may be due to expectations that certain real estate asset prices may keep pace with inflation, and the hope that resurgent demand in certain markets will outstrip overall supply. Still, the picture varies by country.

Given the current market environment in Spain, it is not surprising that investors in Spanish real estate assets show one of the weakest views that inflation will prompt activity — with barely half seeing this as a driver of real estate asset investment.

On the other hand, 88% of German investors agree that inflation will lead to an increased number of real estate asset transactions. A similar number in Switzerland take this view as well.

Eurozone instability will moderate investment

Almost three-quarters (72%) of investors surveyed expect the ongoing Eurozone debt crisis to reduce European real estate asset investment activity. There is, however, some variance in the intensity of this view across countries.

Eurozone crisis will reduce real estate asset investment 

Investors in Sweden, a market infrequently connected with the ongoing crisis, are the most concerned with 86% believing activity will be adversely affected by the turmoil.

Of Eurozone members, investors in Germany are the most comfortable with only 52% noting the same caution.

It may therefore be inferred that local market economics weigh more heavily on the minds of investors, than broader regional volatility. This picture is further clarified by the result in Switzerland, where 50% do not see the Eurozone crisis as likely to affect activity levels substantially.

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