Building confidence

European real estate assets investment trend indicator 2014

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Investor sentiment rises as the real estate market starts to recover from the Eurozone crisis

“The European real estate market shows strong signs of recovery as the Eurozone rebounds from the recession. With banks under continuing pressure to restructure, investors will continue to look for alternative debt sources to finance their transactions. Meanwhile, the maturation of mortgage-backed securities and the disposal of sub- or non-performing loans will help to fuel a healthy supply of real estate assets.” —Hartmut Fründ, Managing Partner, Transaction Real Estate, Germany.

As the Eurozone rebounds from the longest recession since its inception, real estate investments are looking increasingly attractive across Europe. Improved sentiment is evident among investors from all parts of the continent. Indeed countries that had been among the hardest hit by the financial crisis, including Spain and the Netherlands, are now among the most optimistic about their real estate market. This renewed confidence is set to attract international investors and boost transaction volumes.

Investors are becoming more aware of new developments in the sector. These include the ongoing loss of traditional brokers’ market share to online listing services, the evolution of home offices and the impact of e-commerce on commercial property.

Broader changes in Europe’s property sector are also becoming more pronounced. Previous divisions between mature and emerging markets, and between Europe’s periphery and its core, have given way to a more complicated picture of the region’s real estate markets.

Efforts to restructure the region’s banks and to prop up weaker economies are likely to have a significant effect on European property markets. These efforts will encourage investors to rely more on alternative debt sources to finance real estate transactions. And they will help to increase the supply of assets, through the disposal of non-performing loans and the maturity of mortgage-linked securities.

Expectations for 2014

  • Transaction volumes are set to increase in 2014.
  • The Eurozone debt crisis is no longer seen as the main driver for real estate investment.
  • Respondents expect the real estate markets of all European countries to be attractive in 2014.
  • Most European countries expect supply of real estate assets to increase in 2014.
  • Demand for mezzanine financing and alternative lending is set to rise.
  • Commercial mortgage-backed securities markets are expected to revive in 2014, especially in the more mature markets.
  • Investors’ risk appetite is increasing, and speculative developments are set to improve slowly in some markets.
  • Investors see a mixed outlook for prices in prime locations. Price levels in the hardest-hit Eurozone markets are expected to bounce back. But in markets that recovered earlier, prices are expected to top out or decrease.