Trends In The The European Property Market 2018
The European property market 2018 is characterised by a sense of optimism driven by a variety of factors. In fact PwC in their 2018 ‘Emerging Trends in Real Estate’ focusing on Europe noted that more than half the respondents who were polled (real estate experts) said that they expect robust growth in the European economy over the next five years. This optimism is reflected in their expectations for property investment growth.
The impact of these growth predictions should not be underestimated. Based on the fact that industrial production is on a steady upward path and that retail earnings remain strong occupier demand is predicted to remain extremely robust. Add to this a scarcity of business rental space and those is search of secure long term rental income would do well to look to the EU.
However, there is a risk in under supply, especially in the office market. There are an increasing number of developments across Europe that are designed on the premise that the under supply exists and that investments in this area can pay attractive dividends. This is especially true in the office market. The recovery of the European economy has also meant that financial institutions are now willing to take on more risk when it comes to lending to developers. Any investor who does not want to be caught flat footed by a glut of new developments should keep a weather eye on new developments that are in the pipeline.
So what are the other drivers behind this expected growth?
There seems to be a sense that investors in the European markets are viewing prime real estate is being overpriced. One result of this is that these investors are taking a less risk averse view when it comes to their investments in order to achieve their targets as far as returns are concerned. However this said investors are still focused on markets with quality assets.
Investors are also looking across the entire continent for opportunities that provide value on the medium and long term.
Unsurprisingly the thorny issue of BREXIT remains one of the worries that investors have expressed. This may lead to reduced values in the United Kingdom – however those who have an eye on the long term seem to have no doubt that London will remain a prime investment destination.
Even given the status of London as a prime property investment destination the desirability of property in German cities remains extremely high.
Berlin for instance was singled out as the most desirable city in Europe when it comes to property investment. Frankfort and Copenhagen followed in second place and Munich and Hamburg also made it onto the list.
Copenhagen was particularly noteworthy and may indicate an emerging trend when it comes to the potential for attracting property investors. industry experts identified a few factors which have firmly positioned the city on property investment radars.
The most important of these factors is the growing employment in the city. This has made residential property extremely attractive for investors. The residential properties that were mentioned as prime investment targets included senior living to facilities to student accommodation. Copenhagen may provide a blueprint for other cities across Europe to follow. If the fundamentals such as infrastructure development and public transport are in place then there is no reason that many other cities cannot attract similar interest from property investors across the globe.
The European property market 2018 also seems to be pointing the way to a new dynamic when it comes to how investors – and those who use the properties want to enjoy a lifestyle that encompasses a more utilitarian approach to property development.
A major driver of this change has been the seemingly unstoppable trend of urban densification. This has in turn mean that developers are focusing once again on mixed use developments. It seems that both business and consumers are losing the appetite for long commutes. The line between the professional and personal lives of consumers seems to be becoming increasingly blurred. People want to live and work (and enjoy retail experiences) and enjoy a sense of community in a space that offers opportunities for the growth in all aspects of their lives.
Included in the equation is the ever more important communications issue. given that consumers and business rely ever more increasingly on connectivity in order to maintain competitiveness and enjoy a higher quality of life those developments that invest in connectivity will enjoy higher investor confidence.
The outlook for the European property market 2018 is certainly more positive than it has been in recent years. However, as with all things property related the astute investor will keep an eye on both macro issues affecting the entire region and micro economic issues in potential investment destinations. The time may be ripe for investment – but due diligence is still required.