European real estate investment activity will continue to slow through at least the first half of 2008, though performance will vary widely, dependent on local economic conditions and property fundamentals, according to global real estate adviser DTZ in its European Quarterly research paper. Nevertheless, strong fundamentals indicate international investors are preparing to re-enter the European market at the right price.
On a relative basis, given the recent decline in bond yield and high risk premium levied on equities from increased volatility, property yields in the UK are looking more attractive than the recent past and the market is seen as approaching "fair value". Across Europe, higher property yields are expected with corrections taking place, most notably in secondary cities. However, despite the slow down, anecdotal evidence is emerging that opportunity funds are standing-by, ready to re-enter the market at the right price. On current expectations, DTZ anticipates a moderate decline in European transaction volume in Q1 2008. However, this is very unlikely to surpass the sharp drop witnessed in Q4. Q1 2008 European investment activity is projected to reach