Only one in four real estate investors in Europe believes that the current market cycle will peak soon and that the initial rate of return on real estate will start to rise again. The overwhelming majority of respondents (75%) do not expect a turnaround until 2019. Of that figure, 43% expect it to come even later. Those are the findings of the latest property investment climate study by Union Investment. The study, which is carried out twice a year, this time involved a representative survey of 168 professional property investors in Germany, France and the UK.
The expectation of a continuing late-cycle environment correlates with a rising focus on security, which is most apparent in the fact that German and UK investors are prepared to accept lower returns in exchange for greater security. An investment strategy based on “same risk – lower return” is being pursued by 71% of investors in Germany and by 74% of respondents in the UK. Compared to the last but one survey, carried out a year ago, this represents a rise of 15 and 14 percentage points respectively among those surveyed. In France, the tolerance of risk is somewhat higher, even in the current market environment, with 41 % of investors stating that they are taking on more investment risk in order to achieve the same yield targets as before. The remaining 59% expect to achieve lower returns with the same level of risk.
