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| New reports show property investment volumes reach €95 billion in first half of 2006 |
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Data gathered from Jones Lang LaSalle shows that real estate investment volumes in Europe for the first half of the year have increased by 30% on the same period last year.
According to Jones Lang LaSalle's latest European Capital Markets Bulletin, sales volumes reached €156 billion for the full year in 2005.
Commenting on these findings, Tony Horrell, CEO of European Capital Markets at Jones Lang LaSalle said: "High levels of investor demand and a number of major portfolio deals pushed European direct investment volumes to new heights; activity in the first half of 2006 alone was above full-year levels seen in 2000-3."
Highlighting key investment areas, he said: "Germany continues to be a focus for investors in Europe, with the largest share of cross border transactions ahead of the UK and France, and has overtaken France to take second place after the UK in terms of share of total transactions. This was due in part to several very large portfolio sales in Germany and also a number of cross-border investors, including third-party managed unlisted vehicles taking advantage of relatively high yields in the German out-of-town market to start building retail portfolios."
Paul Richards, Head of European Capital Markets Research added: "It is also worth noting that investment activity became more concentrated in the 'Big Three' core, low risk western markets in the first half of the year. The combined share of the UK, Germany and France was 73%, up from 66% in 2005."
Looking ahead to the rest of the year Tony Horrell concluded: "We expect the strong levels of investor demand to be maintained in the second half, pushing transaction volumes up towards the range €180-200 billion by the end of the year. With the introduction of REITs in the UK in early 2007 we expect to see a number of transactions, as companies converting re balance their portfolios, or possibly split them into stabilized, income-producing "REITable" assets, and development assets not suitable for the REIT structure."
The report found that cross-border investment as a proportion of total volume rose to 69% in the first half of 2006, from 59% for the whole of 2005. Furthermore, 56% was inter-regional, involving investors from outside Europe, and 44% was due to European investors buying or selling outside their home country elsewhere in Europe.
The UK was the most active source of capital, responsible for 28% of both purchases and sales in the first half. German investors were large net sellers, responsible for 25% of purchases but only 6% of sales. Vehicles managing capital from many countries ("global" source of capital) were responsible for 16% of purchases.
Unlisted third-party managed funds were the most prominent type of purchaser, responsible for 43% of purchases in the first half of 2006. The next most prominent type was the listed sector (taxed and tax-transparent) at 16%, followed by private individuals or syndicates (the vast majority being British or Irish) at 15%. Institutions had a relatively low share at 11%.
These findings should be of interest to IFAs who are starting to receive more and more enquiries about property from their clients.
In a separate report from Citywire, millions of pounds are being poured into open-ended property funds - with Norwich Property, the largest UK property unit trusts, now worth £2.8 billion, with inflows of some £500 million this year alone. New Star Property has also increased £1.1 billion. Other high profile funds include Resolution UK Property (now worth £508 million), SWIP Property (£746 million), Standard Life's Select Property (which is attracting £15-20 million a week) and Skandia Property (£1 million a day since its launch last December).
The Association of Real Estate Funds also observed recently that £1.2 billion was invested in property funds during the first quarter of 2006, with the Citywire report claiming that much of this has come from life and pension funds. However, there are already concerns about some sections of the UK market being over-valued and Standard Life (which has a £1.8 billion unitized property life fund) has reintroduced a restriction on investment whereby investors can only put 25% of the money they put into the investment bond into the property fund (mainly because such funds are being 'swamped' with new money, according to Citywire). |
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