2018 Emerging Real Estate Trends: Europe
Property Outlook
Markets in continental Europe are seeing an increase in investments thanks to investors being wary of the UK Brexit situation. The concern over Brexit, though waning, will continue to some extent into 2018. Investors are also showing more interest in France since the election of Emmanuel Macron. This is a large change since France has been low on the list for investments for years.
On the other hand, Germany is now considered a safe haven for capital. Four of the top six leading cities for investment and development are in Germany. Berlin is at the number 1 spot and was also in that spot in 2017. Frankfurt shares the number 2 spot with Copenhagen, which moved up four spots from 2017. Frankfurt moved up from third in 2017 to the current number 2 spot.
Munich moved up one spot to fourth in 2018. Madrid and Hamburg each moved up four spots to fifth and sixth, respectively. Dublin lost three spots, moving down to seventh in 2018. Stockholm remains at eighth place. Luxembourg, which was not in the top 10 for 2017 has moved up to the ninth most desirable place for investment and development. And finally, Amsterdam moved up one spot to tenth for 2018.
Residential Market Outlook
Previously, the residential real estate market was seen as a specialist or niche market. Investors would stay away from residential real estate because they thought it was too specialist. However, the residential market has shown many opportunities, partially due to the housing shortage in Europe, and because investors are looking at mixed-use development.
Emerging Trends Europe showed that affordable housing is one of the issues with residential development for 2018. This is even more of a concern than mass migration and environmental issues. However, because the demand-supply imbalance will most likely cause rents to increase, residential real estate investment will open up. Investors are looking at Dublin, Italy, Amsterdam, Spain and France. Additionally, those surveyed for the Emerging Trends Europe publication also believe that Luxembourg, Austria, Ireland, the Czech Republic, the Nordics, Poland, the Netherlands and Belgium will be hot spots for residential real estate in 2018.
One adviser in the UK also stated that he believes that with build-to-rent investments, many more investors will be jumping on the residential bandwagon. Two-thirds of those who responded to the survey also believe that because of redevelopment, residential real estate will become prime assets because of urbanization and infrastructure. Residential real estate is expected to become a low-risk strategy instead of a higher-risk niche market.
Commercial Market Outlook
Debt and equity is expected to be as plentiful in 2018 as it was in 2017. Though 2015 was a peak year and this year's numbers are still expected to be below 2015's numbers. However, they are expected to be historically high. About 50 percent of those who participated in Emerging Trend Europe's study believe that liquidity in debt and equity markets, as well as for development and investment, will increase.
The underlying economic conditions are favorable for the real estate markets to remain liquid. Because fixed-income instruments in the equity market are stale, investors are turning to real estate. Since most people core real estate has low yields, they figure they may as well start investing since yields may increase dramatically. Yields are not expected to fa any further in major German cities or in Paris.
Since liquidity is high, investment levels will continue to rise, and, according to a major European insurance company not named in the source, every country in Europe features a growing economy, which bodes well for commercial real estate.
Even if interest rates rise, the commercial real estate market is still expected to be fertile for 2018. One opportunity fund manager stated that there is enough room to absorb up to a 150-basis point increase. For now, the market is priced right and debt is a good position to take since investors and developers are able to generate good income and protect their capital at the same time.
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