EuroProperty: Volumes slowdown signals increasing investor caution

Late stage rental growth prospects seen as not justifying high prices

The European property investment market is slowing down because investors do not believe rental growth prospects justify the high values of real estate.

At Savills’ annual Financing Property presentation in London this week, head of European research Mat Oakley attributed a slowdown in investment volumes to the late stage of the property cycle.

‘It is very late, across the world, with record high prices and low yields. We are at the beginning of a period of investors saying: “we don’t feel the rental growth prospects late in the cycle justify the high prices”,’ said Oakley.

The fact that UK transaction volumes were down 22% in Q1 2019 was more about the stage of the cycle than Brexit, he said, pointing out that volumes also shrank by 24% globally in the quarter.

Oakley suggested that the UK was a lead indicator for the rest of Europe for several ‘disruptive’ trends that are affecting real estate. The most visible is retail.

Savills said refinancing will constitute a bigger part of the UK financing market in the next few years because 78% of outstanding debt is due for repayment in the next five years.

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