RICS GLOBAL PROPERTY SURVEY November 2007

Investment activity is set to stagnate across the UK, Ireland, Spain and Germany as investors retreat from traditional European financial centres in the wake of the global credit crunch, according to the latest RICS Global Property Survey launched today (3 December 2007).

However, demand is expected to hold firm across emerging European markets, buoyed on the back of booming economies, despite the rise in financial risk aversion which has intensified in recent months.

After record highs in the previous survey period, lower risk appetite, tighter monetary conditions and a marked moderation in house price growth, across several Eurozone countries, are all starting to weigh on the commercial property market in Western Europe. Investment markets are expected to feel the brunt of the slowdown in activity although occupier markets will also be weaker in this part of Europe.

Investor demand into real estate in Western Europe was already moderating during the first half of 2007 before credit events intensified the renewed pessimism towards the sector. Growth in investor activity more than halved across London, Madrid, Frankfurt and Dublin, during the first half of the year. Worse is set to come with a fall off in demand anticipated across several markets as conditions to finance deals become much harder.

Respondents remained optimistic in Eastern Europe where booming economies are expected to continue to outperform their more developed neighbours in spite of the credit turmoil. Capital values are projected to rise at a robust pace in Moscow, Istanbul and to a lesser extent Budapest and Warsaw, as competition for limited grade investment stock drives prices higher.

The Lisbon market for investment has actually slowed down outside the office sector as the pace of job creation has decreased, thus retail and industrial appetite were more negative with yields expected to stabilise. On the other hand it has shown a resurgence in occupier demand in office and retail.


Commenting, Oliver Gilmartin, RICS Senior economist said:

“The latest survey provides further evidence that a decoupling of emerging and developed markets has occurred in recent years although current optimism could wane should credit market turmoil persist through 2008.

Global property funds have dominated cross border activity over the last two years driving capital values higher, particularly across emerging European markets where quality product has been limited. If funding into these vehicles becomes scarce, then weight of money driving yields lower could quickly reverse as the re-pricing of risk rears its ugly head across less tested markets.”