Recent European valuations data from MSCI for the second quarter has confirmed that capital values are still falling across all sectors, but at a slower pace than they were last winter. This has raised the question as to whether real estate has reached a turning point in this downturn. Oxford Economics, however, says a quick bounce back for values looks unlikely next year and has given five key reasons why valuations will not recover strongly in the near term in a recent white paper.

Firstly, tight credit conditions this year will continue to place further pressure on debt refinancing. The ECB bank lending survey has remained in tightening territory since March, as indicated by business loan terms, which had been falling in line with capital growth up until recently. Oxford Economics says the relationship between the two series suggests that values should have fallen more over recent quarters than has been the case. The economics forecasting firm says credit conditions imply