Nery Alaev

QE benefits for European real estate

The Quantitative Easing programme enacted to stimulate Europe’s sluggish economy has found advocates in the form of real estate buyers. I have taken notice of this and have decided to divulge on the issue, in order to draw a conclusion.

Reporting by Bloomberg Business found that the reason for QE’s popularity among investors in European markets was partly from the slump in the Euro caused by QE, which in turn has made property look cheap thanks to the currency’s overall weakness. As well as this, a shortage of newly-built real estate in the region (a result of the global recession in 2008) has pushed up rents, according to experts from M&G Real Estate.

Strong regions

According to Knight Frank, real estate investment transactions totalled €104.2 billion Euros through to June, with deals tripling in Portugal and more than doubling in Spain. This is a clear indication of positive sentiment in real estate, given that Spain in particular suffered a major downturn in property prices due to the global recession and is now seeing a return to growth.Barcelona - Nery Alaev

Investment has come from across the globe, according to Knight Frank’s experts. Andrew Sim, head of European capital markets at the global real estate consultancy, said “Investment volumes continue to be driven upwards by the strong international demand for European commercial property, particularly from U.S. investors.”

The strong international demand for European commercial property is an indication of recovery.

Being careful

While the current environment may convey a sense of attractiveness and opportunity, one firm has warned investors about the threats still present in the region’s property market.

Standard Life Investments noted in the Financial Times that the ‘peripheries’ of the market, such as Ireland, were still risky for investors. Standard Life Investments came to this conclusion after carrying out risk-reward research into European commercial property markets, which considered factors such as competition levels, market transparency and the state of the wider national economy in question.

In conclusion, research has shown that there are signs of recovery in the European property market, but it’s also shown that a risk remains. Make sure you factor in every standpoint before making a judgement.

Nery Alaev

Nery Alaev is the current director of ESN Investments GmbH, which engages in acquisition and development of commercial and residential property in Germany and Austria.