March 19, 2008 - Prague real estate market shows high stability and low risks, and investors anticipate slight rises in rents.
Moscow and Istanbul ranked first and second, respectively, as this year’s top real estate markets in Europe for both investment and development prospects, according to the real estate forecast, Emerging Trends in Real Estate® Europe 2008, by the Urban Land Institute (ULI) and PricewaterhouseCoopers LLP.
Emerging Trends, which covers 27 markets in countries throughout Europe, is based on surveys and interviews with nearly 500 of the industry’s leading authorities. The report contains predictions for individual property sectors as well as markets, along with insights regarding real estate capital markets and the economy in general.
Of the cities in Central Europe Prague is again the highest ranked city in 12th place for investment prospects. Warsaw has improved in investor’s view from 22nd to 16th place, while Budapest has declined from 24th to 26th.
With cities in new Europe showing a large growth in opportunity, the Czech market is seen as a mature market with high stability and low investment risks. Prague is seen as a “positive” market with combined buy-hold ratings of 80% plus for all asset classes.
“The story is very different depending on where in Europe you are looking to invest and your appetite for risk” according to Glen Lonie, CEE Real Estate Leader, PricewaterhouseCoopers, Czech Republic. “At one end of the scale Russia and Turkey are booming, at the other end London has fallen out of favour with many investors. We are seeing the emergence of very different real estate markets in Europe. As investors look for returns in a volatile market, they need to understand the complexities of the markets that they are moving into.
As for the Czech and other central European markets, there is increasing consensus around their status as mature markets with high stability and a lower investment risk. This situation attracts some of the more conservative investors to the region. For those seeking higher returns greater prospects exist further East.”
Paris and London, last year’s top rated cities, have both declined. Paris which held the top investment rating in past years, slipped slightly, taking fifth place for investment prospects and sixth place for development prospects. One of the sharpest rating drops among the European markets occurred with London, a long-time favourite that fell to 15th place for investment prospects and 13th place for development prospects. That city, more than other markets in the report, is experiencing declining economic conditions similar to those in the U.S., including a drop in consumer spending, falling house prices, a rise in personal indebtedness, worries over home repossessions, and turmoil in the financial sector.
According to the report, the changeup in the top markets suggests a desire by industry professionals to branch out of “Old Europe” cities and “investigate new markets and diversify current holdings and developments.”
“Without question, Europe is facing a bumpier ride this year than the last few years. The findings in Emerging Trends show how markets in Europe have become more globally connected and more vulnerable to economic shifts occurring in other parts of the world,” said Richard Rosan, president, ULI Worldwide. “However, the fact that many respondents remain confident about European markets points to the still-local nature of real estate. We are seeing a lot of guarded optimism.”
“Tighter credit conditions, higher energy prices, a reduction in euro-based exports and a cooler housing market will have an impact in the months ahead,” said William Kistler, president ULI EMEA/India. “But, we firmly believe that most markets will weather the downturn with a soft landing, due to relatively stable property fundamentals and reasonable economic growth. Those who are patient and prudent will succeed.”
In terms of markets ripe for investment, top-ranked Moscow was rated first or second in terms of “buy” recommendations for all property types, with office and retail particularly strong. Istanbul scored equally high as a strong “buy” market.
Elsewhere in Europe, an improvement in Germany’s economy is reflected in the inclusion of four German cities – Hamburg, Munich, Berlin and Frankfurt – on the list of top ten investment markets. “Despite all the turbulence in the international markets, the German property market is still on the upturn,” the report says.
In terms of development prospects, the top markets are: Moscow, Istanbul, Munich, Hamburg, Lyon, Paris, Prague, Warsaw, Stockholm and Helsinki. One factor that could affect future investment and development decisions is an “expansion in the definition” of Europe to include parts of the Middle East and Africa, the report says, noting that many interviewees mentioned Abu Dhabi and Dubai as potential markets for business.
END
Notes to the editor:
- The report released today is the fifth annual European edition of Emerging Trends in Real Estate®. Copies of the report are available at www.uli.org.
- The Urban Land Institute (www.uli.org) is a global nonprofit education and research institute supported by its members. Its mission is to provide leadership in the responsible use of land and in creating and sustaining thriving communities worldwide. Established in 1936, the Institute has more than 40,000 members representing all aspects of land use and development disciplines. ULI Europe, Middle East, Africa and India (EMEA/India), based in London, serves the Institute’s 2,500-plus members in Europe, the Middle East, Africa and India.
- PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 146,000 people in 150 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice.
“PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.
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