This international publication "KPMG European Real SnapShot“ gives an overview and deeper insight into the real estate markets across Europe.
Sentiment remains positive in the European property investment market. At EUR 285bn, the volume of transactions last year was the highest recorded since 2007. The high point in 2007 was missed by about 5%. Compared to last year, the volume of transactions has risen by a remarkable 23%.
After many indicators in the first half pointed to a record year, transaction activity weakened in the second half of the year. In Q4 2015, transaction activity was 6% below the previous year’s level at EUR73bn. High prices in some submarkets resulted in increased caution on the side of some investors.
Demand for European property investments continues to be driven strongly by international investors. For the first time since records began, they have been responsible for over 50% of total investment. A breakdown of investment activity shows that 32% of transactions by volume came from global investors and 20% from supra-regional investors. Global players investing in European property are mainly based in the USA or Canada. However, the strongest growth in recent years has been seen in transactions by Asian investors.
In spite of relatively stable economic data, since the start of 2016, the international financial markets have been marked by extraordinarily high volatility. There is increased speculation about the threat of a recession because of low oil prices, the difficult position of European banks, uncertainties about the continued existence of the European Union (Brexit) and China’s flagging economy. However, if one looks at the available economic data, there are currently few indicators of a recession. Consequently, the International Monetary Fund is anticipating growth in 2016 of 1.7%. However, there is imbalance in growth within the EU countries.
For the current year, despite an initial weakening trend, we anticipate transaction activity in Europe to remain high. Sound economic prospects are underpinning demand for property. However, the most important driver for demand is still anticipated to be the lack of alternative investments. In the search for returns, there is no route to avoid investments in property in the current low interest rate environment.
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