No bubble, no crash: Europe’s real estate markets have little to fear from what is to come
The European real estate market in 2015 looks exciting. The economic recovery is picking up, total returns have been very strong over the previous two years and a growing number of markets are reaching record-low yields. Is this going to lead to a price stabilisation, a correction, a slump or maybe a crash? While no-one has a crystal ball, we will argue that we doubt there will be any crash. While we accept that some markets may have got ahead of themselves, no bubble situation exists at present, unlike in previous periods. In any case, we believe that plenty of investment opportunities remain, given that fundamentals are more robust than during previous boom periods.
The current environment
Investors remain overwhelmingly positive toward European real estate. Annual investment volumes in 2015 are likely to exceed the 2007 peak; prime office yields have continued to compress aggressively across the board; and capital values are, in places, more than 20