European Property Fair Value Index reaches 10-year peak – DTZ
DTZ last week announced that its Fair Value Index for European property in Q4 2012 had risen to its highest score for 10 years, with a score of 78 compared with 62 in the previous quarter.
Of the 105 markets covered, 69 were rated as HOT and 25 as WARM – i.e. attractive to investors. DTZ said that almost a third of European markets had been upgraded to HOT or WARM in the past quarter, demonstrating the rapid increase in the attractiveness of property, said Magali Marton, head of CEMEA research at DTZ.
“The most significant factor behind this change has been the more positive outlook for the eurozone, which has pushed down bond yields and required returns as the risk of break up has receded. The upshot is that property looks better value in comparison to bonds.”
Belgium, the Netherlands, the Baltics, Finland, Norway and Denmark all recorded the highest possible index score of 100, indicating attractive pricing across the office, retail and industrial markets. They were closely followed by the UK and Ireland and Germany, which both had an index score of 91. A third group of countries, comprising the CEE markets, France and Italy, were all priced at roughly Fair Value. Spain languished at the bottom, with an index score of just 17, making it an unattractive investment option well adrift of other European markets, DTZ said.
The UK’s index score rose just 3 points from the previous quarter, but the upgrading of UK regional office markets to HOT from WARM now means that 17 of the UK’s 20 markets are classified as HOT, DTZ noted.
By sector across Europe, industrial property was the most attractive, with a score of 86 compared with 82 for retail premises and 70 for office property. DTZ said that low rental and capital growth throughout Europe had increased the significance of higher income returns and had sent industrial property to the top of the sector rankings.
