European property investment falls amid uncertainty
In the first quarter of 2024, investment in European real estate fell by 26%. Their volume amounted to 34.5 billion euros, the minimum for the last 13 years. According to experts, the slowdown in market activity is due to the level of interest rates. The tightening of energy efficiency regulations and the gap between the requirements of sellers and buyers are also putting pressure on the market.
It is worth noting that the volume of investment in the European property market has been falling for seven quarters. The office sector has been particularly hard hit, with sales volumes falling by 45%.
Overview of the situation in European countries
The EU countries with the largest economies are Germany and France. But even here, the property market is in serious decline. According to statistics, in the first quarter of 2024, the dynamics in Germany were as follows:
– the value of completed sales and purchases across all sectors of the market totalled €6.3 billion;
– the lowest figure since 2011;
– the volume of contracts in 2022 was €80bn, and the figure for the same period in 2023 was €32bn.
Sellers of office property are having the hardest time. High interest rates are deterring potential investors. In Germany, the volume of investment in the market fell by 32% year on year.
In France, investment fell by 69%. The main blow fell on the office sector. In Paris, there were only eight deals for €500 million in the three months. This is the lowest figure in the office market’s history in the French capital.
According to Tom Leahy of MSCI, the market is still uncertain about the level of interest rates. The sector expects them to fall, but no significant changes have yet been seen.
Trends in the rental sector
Investment in the European market is also falling due to tighter regulations on property ownership. In addition, rental yields remain low in most countries. The luxury sector remains stable in the region, having historically shown resilience in times of crisis. Some cities have even seen investment growth. This is particularly true in the hotel sector, where there is an influx of tourists.
In 2023, room rates increased by 30% compared to 2019 in the following countries:
– France;
– Greece;
– Ireland.
The designated indicator increased by 20% in the UK, the Netherlands, Spain and Belgium.
Meanwhile, there are countries where rental yields will continue to rise across all sectors. This is the case in Georgia, where the economic recovery has positively impacted the market. Owning a standard apartment in the country can yield 10% per annum. Luxury properties offer even higher returns.