A recent study commissioned by DIFA Deutsche Immobilien Fonds AG found that institutional property investors in Europe mostly view the future with confidence, although they expect competition to intensify at both national and international level.
Investors are basically happy with the availability of key market data, but regard the development of clear, consistent standards as crucial to improving their ability to assess the opportunities and risks of investing in other countries. Entitled "Investment Culture in Europe 2005", the DIFA study coincides with the company's 40th anniversary and 50 years of the Union Investment Group. It examines how institutional investors rate the general climate and operating environment for property investment in 2005, and seeks to identify the investment culture prevailing within the industry. DIFA joined forces with Roland Berger Market Research to interview around 150 institutional property investors in Germany, the UK and France, including global and national project developers, managers of open ended/closed real estate funds, quoted property companies and Real Estate Investment Trusts (REITs).
DIFA's study represents the first systematic appraisal of Germany's property investment culture and was based on the six indicators regarded by those consulted in a pilot study as most important for an investment culture - "values", "expectations", "transparency", "market structure", "objectives" and "operating environment". The indicators were combined to form a "2005 investment culture index", resulting in a mean score of 59.9 points for the institutional property investment sector. This outcome is a sign that an investment culture exists within the sector but the fact that a maximum of 100 points can be awarded shows that there is considerable room for improvement. "Opportunities for cultivating an investment culture and creating the necessary environment mainly exist in the areas we identified as significant drivers or inhibitors of a strong investment culture," said DIFA Management Board member Ingo Hartlief when presenting the study's results at the EXPO REAL commercial property show in Munich.
The study found that a high level of transparency within investment markets and the availability of market data play a key role in developing a strong investment culture. Commitment, confidence and a willingness to take action - all signs of a sophisticated investment culture - depend on an investor's assessment of their own company's performance, as well as the anticipated performance of the relevant property markets.
Transparency makes markets more attractive
"Building a strong investment culture includes recognising that transparency makes markets more attractive. Reliable transparency standards that ensure comprehensive property market data is available are an important factor in attracting international investors and the associated capital," Hartlief stressed. The study shows that markets with low transparency are perceived as presenting a greater risk and being less capable of development than more transparent markets. "Where there is cross-border competition for investors, transparency is a significant locational factor that we in Germany need to do more to promote," added Hartlief. "Market players can make a real contribution to boosting the transparency and attractiveness of the property sector in their country by providing their own data."
Investment climate rated positively
For property investors, the biggest influence on investment culture in 2005 was the "expectations" indicator, with a mean value of 58.7 points. This shows that real estate investors in Germany, the UK and France generally regard investment in their countries in a positive light. The current economic health of property markets is viewed more positively than a year ago and opinions regarding the outlook for the next twelve months are more optimistic than for last year. This also applies to the general willingness to invest. Interestingly, an investor's assessment of their own company's p