DTZ has published its European all-property Fair Value Index results for Q4 2013. The Index, which provides insight into the attractiveness of current pricing in European property markets, remained stable in the fourth quarter of last year at 72, although the figures were down slightly from 74 in Q3. European offices dipped from 60 to 55, retail was up from 79 to 84, and industrial dropped from 91 to 88.
Over the past 12 months, the Fair Value figures for office, retail and industrial have separated, which suggests that investors have decided to be more selective in choosing different property types. Industrial property appears to be the most attractive sector at present.
DTZ predicts that the European property market may become less attractive to investors over the next couple of years as increases in bond yields will make property look less attractive in comparison. The Fair Value Index score for Europe is expected to drop to 50 by the end of 2015.
Only six European markets were upgraded to “Hot” status this quarter, and all of them were located in either Spain or Italy.
Falling bond yields have reduced required returns in these countries, and a stronger economic outlook for both countries has made both markets more attractive to investors.
The 25 per cent unemployment rate in Spain and the weak domestic demand in Italy should both be considered risks for investors, though.
