Real Estate investment has begun with a new zeal in the start of the new decade. Despite the global unease and caution around the economic outlook for the next year, there seems to be a positive frame of mind in the real estate investors. With the new year around the corner, a lot of investors are confident in safe and stable returns on a property even though the current year has been throwing curveballs at real estate investors throughout.
Low Rates Means High-Interest Rates
The escalating tensions between China and the United States have led to an atmosphere of political uncertainty in 2020, and the continuing uncertainty revolving around Brexit is helping cloud sentiment all over Europe. Yet, despite all this, the outlook of investors are broadly positive, possibly due to the expectation that the interest rates will continue remaining low. A survey conducted by the ETRE 2020 survey suggested that 74 per cent of investors believed that the interest rates would stay the same or decrease in the short term, and 59 per cent of investors thought that it would decrease in the long term.
A theme known as the development dilemma seems to be creeping in because of the high demand for real estate. As a result of limited availability, almost 65 per cent of all prime estates in Europe are overpriced. This means that nearly 68 per cent of all investors believe that development is the better way to access prime real estate rather than acquisition. However, investors are yet again faced with another problem here. An increase in construction costs means that development is not a cheaper option. An overwhelming 67 per cent of investors, which is almost two-thirds of the survey, were seriously concerned about the spike in the cost of construction.
Environmental and social issues are becoming topics of discussion in the real estate sector now, and today in 2020 and in the coming years of the decade, this discussion will be ramped up becoming more multifaceted and covering the full spectrum of social, environmental and corporate governance (ESG), community impact and health and wellbeing. This is strongly suggestive from the data from the ETRE data. Forty-eight per cent believe that the climate change risk is real and will negatively affect their portfolio in the next 12 months, and a whopping 73 per cent think it will increase in the next five years or so.
Paris Tops The Rank
Paris has been termed the best place for real estate prospects in all of Europe. The game-changer for the French capital was the development of the Grand Paris project, Europe’s largest transport scheme. Amsterdam, Berlin, Frankfurt, Hamburg, Madrid and Munich all feature in the top ten too.