European real estate investment to halve before rebounding sharply

George Sell George Sell Uploaded 22 May 2020

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UK: Forecasts from Savills predict that European real estate investment activity is set to fall by 50 per cent before rebounding sharply within the next year.

Savills says neither the speed or the depth of the crash will be as bad as the global financial crisis, when volumes across the continent plunged by 72 per cent between 2007 and 2009.

Eri Mitsostergiou, director of Savills European research, said: “We believe that short-term headwinds are likely to have a negative impact on deal flows over the next three to six months. This time however, high liquidity, low interest rates, constrained development pipelines and a better capitalised banking sector should contribute to a faster recovery of investor sentiment. With regards to pricing, we anticipate some price softening, as the market is not underwriting the rents and capital values pre-Covid-19. Nevertheless, we do not expect prime yields to correct to the extent they did post GFC, as return requirements above the risk free rate remain satisfactory.”

Savills said that across most European markets there are indications that investors remain active particularly in the prime market segment, with several deals in progress and minimal price discounts.

The company predicts that highly liquid markets such as London, Paris, Berlin and first tier German cities, as well as markets with good long-term rental growth prospects such as Stockholm, Amsterdam and Madrid, will continue to attract investor interest.

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