European property could give investors a 7% return over the next five years says Aviva.
The European ex-UK real estate market could return up to 8.2% a year over the 2014-2016 period and 7% per annum over the longer term between 2014 and 2019. The forecast comes from Aviva Investors.
Manager of the Aviva Investors European Property Fund, Andrew Hook, said: “Investors will best served by strategies that focus on prime property for the next year alongside tactical opportunities in Italy and Spain, as well as senior real estate lending.”
He went on to say: “The strength of competition for prime assets in London, Paris and the top-tier German cities is pushing increased volumes of capital towards smaller and higher-yielding markets including the Benelux countries and a recovering Southern Europe. The pricing of prime European real estate continues to be favourable compared with the declines in sovereign bond yields across Europe. Prime real estate remains highly valued for its perceived defensive qualities, and Aviva Investors believes the asset class will continue to attract increased capital from investors seeking diversification and higher yields.”
Within a snapshot of what is happening around Europe, Aviva said that Irish property has experienced a more sudden cyclical recovery than many had expected; and, Spain has also seen a strong turnaround so far this year and, along with Ireland, will deliver the strongest rental growth over the next five years. What’s more, by market sector, Finnish offices, and Irish and Spanish industrial markets are relatively under-priced and are the most appealing European sectors on a risk-adjusted basis.
On the negative side, deflation continues to be the main threat to the European outlook and, according to Aviva, in addition to its growth concerns, the region is at increasing risk of slipping into a Japan-style deflation trap.