Investment in European property jumped 53% in the third quarter of 2009 according to Cushman and Wakefield. Yields are also on the up across Europe. With the exception of the UK, the average yield on European property investments rose 3 basis points on the quarter – the largest quarterly rise since late 2007.
This was part of a report from Cushman and Wakefield on the rising confidence in the European real estate investment sector.
Now is certainly looking like a very good time to get back into overseas property investment in Europe, with a view to completing acquisitions into 2010. Take Germany for example:
Jones Lang la Salle are forecasting that rents on German offices will be 6% lower by the end of this year. Germany is the biggest economy in Europe, largely because of its massive export sector.
A dramatic fall in rental rates on German offices, in line with business expansion beginning to remerge, will likely spark a massive drive on business expansion in German cities; local business expansion, and foreign companies taking advantage of the situation to open offices in Germany.
This will stimulate increased demand in the residential sectors, on property to rent and property to buy. German property has often been overlooked by residential property investors, because other locations offer more spectacular yields, but German property has always been a world beater in terms of the risk/reward ration on buy to let investments,
Now that the foreign investors the world over have learned that solid rental potential that can withstand external pressures is the key to a sound property investment, German property is likely to be high on more people’s short-lists. Such a dramatic fall in office rental rates will push it even higher.
On top of that we have the fact that Germany and Italy accounted for 63% of all retail property investments in the first half of this year. Retail investment is expected to increase in the second half of the year according to analysis by CB RIchard Ellis, and Germany’s retail sector is well placed for some solid growth. This will further fuel demand in the residential sector.
Romania is another market seeing some good expansion in the commercial office sector of late. Analysis by BNP Paribas noted a major increase in sub-leasing from small business expansion. With most of the growth coming from companies involved in business consultancy, IT, private medical public institutions and Utilities, indicating expansion in those sectors within the economy. Therefore demand for residential Romanian property should see some growth in 2010.
Bulgaria sees the opening of the European Trade Centre, a five building office complex and shopping mall in Sofia, now scheduled for Spring 2010. This, again will stimulate increasing demand for Bulgarian property to rent and buy in the residential sector in the area.
Outside of Europe proper, Turkey is doing very well on the back of low interest rates and extended term mortgages. In the two months ending October, the Turkish real estate sector expanded by 2%, compared to a growth of 3% in the previous 9 months. This acceleration is thought to have been because of improving sentiment, and derestricted lending by the banks, including an increase in the term of low-rate loans from 60 months to 10 years.
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