Over the first ten months of 2005, the European real estate market continued to perform well, although widespread economic uncertainty has weighed down upon the attitudes and expectations of families and market operators, whose investment strategies have erred on the side of extreme caution. Low interest rates continue to be the main market driver.
Property fund assets in the nine European countries analysed stood at €268.5 billion at the end of 2004 and this figure should rise to €287.9 billion by the end of the current year. Adding in the figure for Italy (€11 billion) the total rises to roughly €300 billion, a slightly higher figure than the estimate made in June.
In terms of revenues, 2005 should close with a decrease of 1.7% compared to 2004. The sustained growth of the UK's PUTs and the French SIIC funds, and the moderate growth in funds in Spain. Luxembourg and France's Scpi were offset by the overall shrinkage in revenues in Belgium, the Netherlands and Switzerland.
2005 confirmed the success of funds investing in urban development projects and logistics. An ever greater number of funds are focusing on specialisation. This trend is likely to be consolidated insofar as the introduction of REITs in Europe's leading countries will tend to follow the USA model, where specialist funds abound.
2006 should see growth both in revenues and in capitalisation, thanks to the forecast introduction of REITs in Germany and the UK.
The United States
Despite growing unemployment, the USA recorded a generally satisfactory performance. 2005 has been a good year thanks to low growth in interest rates and a strong performance from the residential sector. Volumes of home loan grants remained at extremely high levels throughout the year. The commercial and industrial markets also acquitted themselves well, thanks to the country's fairly modest interest rates, greater confidence in economic recovery and fiscal policies. The offices market is
picking up after two negative years.
In 2005 the REITs market featured seven more funds than the previous year and overall capitalisation has grown from €244 billion in 2004 to a forecast €289 billion by the end of 2005. In the current year capitalisation has grown by more than 18%, exceeding all expectations. In the absence of any significant economic developments the increase in 2006 should prove much more modest, and no greater than 7%.
Over the period January-September, 2005 eight new funds were listed: this brings the total of REITs currently operating in Japan to 22. Another five funds will be launched by the end of the year.
The process of rationalisation, which had led to a fall in overall fund assets in 2004, would now appear almost at and end. In 2005 overall capitalisation should be in the region of €42 billion, an increase of 8.9% on the previous year. Japanese
operators estimate that by the end of 2006 REITs capitalisation should reach €46 billion.
Italy can also boast strong growth in the property fund sector. As at June 30th, 2005, there were 25 funds, as against 19 a year previously. On the same date assets came close to reaching 10 billion euro, doubling in 12 months.
By December 31st total assets should exceed eleven billion euro.
Going on the figures published to date by fund management companies, the assets of Italian property funds could amount to as much as €15 billion by 2006.
- The capitalisation of property funds worldwide currently stands at approximately €1,200 billion , growth of 10% when set against 2004.
- Europe accounts for property fund portfolios worth almost €300 billion, with annual growth ranging from 10 to 35% across different countries.
- The figure for the United States is similar while Japan accounts for more than €40 billion and Australia €200 billion, taking into account all types of property fund.