Union Investment: Confidence in the property markets stabilizing (EU)

Following the severe shocks triggered by the financial and economic crisis, the major European property investment markets are now picking up again. Conditions for real estate investment continued to stabilize in the first six months of the year, particularly in Germany but also in France and the UK.

At the same time, a greater willingness to invest compared to the second half of 2009 means European transaction volumes in 2010 are expected to significantly exceed the prior-year total. Those are among the findings of fund management company Union Investment in its latest investment climate survey, which was conducted by market research institute Ipsos and involved 185 decision makers at property companies and institutional real estate investment companies in Germany, France and the UK.

Union Investment's Investment Climate Index, which tracks attitudes and expectations among European real estate professionals at six-month intervals, has moved up to 67.5 points, which is where the index stood in autumn 2009. "The index is approaching the previous all-time high of 68.7 points, recorded in 2007. This general upward trend is feeding off investor optimism in Germany. In Paris and London, the index is currently static at a high level," says Olaf Janssen, head of property research at Union Investment.

Sentiment towards real estate investment climbed from 66.1 to 67.8 points in Germany, reaching a higher value than the climate index in the other two major European economies for the first time since autumn 2008. The climate index fell slightly by 0.8 in France to 67.5 points and was down one point in the UK (67.2 points). "The recovery in Germany is proving surprisingly strong. It reflects a high level of investor confidence in the performance of the domestic market," says Janssen. Accordingly, a clear majority (58%) of German investors surveyed anticipate a significant rise in investment demand from abroad over the next twelve months, with 63% of German investors expecting the investment climate to continue improving over the same period.

UK investors expect negative fall-out from the crisis in Greece
59% of French investors are similarly positive about the performance of their home market. By contrast, UK investors display a more sceptical attitude: only 34% believe that the climate for real estate investment in the UK will continue to improve in the short-term. 27% of British investors actually expect it to deteriorate. "Expectations of negative fall-out from the crisis in Greece are very pronounced among UK investors and this has affected the mood," comments Janssen. A substantial 71% of British investors expect the crisis in Greece to impact current transactions in Europe.

While UK and French investors remain cautious about the economic outlook (46% and 49% of respondents respectively expect the economic outlook in their country to worsen), the situation at company level was rated much more positively in all three countries than at the start of the year. 58% of respondents assume returns for their own company will improve. Companies say they have weathered the market turbulence well over the past twelve months. 81% of the real estate companies

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