Berlin Best For Property Investment

10 Nov 2017 | 11.54 am

Berlin Best For Property Investment

PwC ranks Dublin as No.7 in Europe

10 Nov 2017 | 11.54 am

A survey of 800 real estate professionals across Europe has found that Berlin ranks in the top spot for property investment for the fourth year in a row, while Dublin is in seventh place out of 31 cities listed.

PwC’s 2018 report on trends in Europe in the sector shows that the capital has been slipping in the rankings for real estate investment, barely making it into the top seven having been ranked fourth in 2016 and third the previous year.

Joanne Kelly of PwC Ireland said: “The report highlights that Dublin is settling into a new phase as a normalised, mature and safe market to invest in after years as an opportunistic investing story. The make-up of buyers is changing accordingly — less US private equity capital and much more institutional money, largely from Europe, especially from Germany, France, Switzerland and the UK.”

According to PwC, Dublin is  viewed as one of the cities likely to benefit from Brexit, given its skilled English-speaking workforce. Brexit will add another few years to demand for commercial property in Ireland, including attracting banks and financial services companies. However, concerns are noted about the potential negative effects if the UK were to go into recession as a result of Brexit, particularly on Irish tourism.

The city’s infrastructure is viewed by respondents as not keeping pace with growth and is noted as another risk where more investment is needed.  The report also notes that Dublin needs more housing. Respondents see the private rented sector and student housing as a huge opportunity in the next three to five years.

Just below Berlin in joint second place are Copenhagen and Frankfurt, with Munich at number four, Madrid five and Hamburg in sixth place.  The annual forecast, published jointly by the Urban Land Institute (ULI) and PwC, is based on the opinions of over 800 real estate professionals, including in Ireland.

Frankfurt has risen to second place after a year of solid growth, much of which has come from the financial sector in the aftermath of the Brexit decision. Copenhagen’s booming residential sector has captured the attention of the international real estate industry while Madrid jumped four places from ninth to fifth.

The industry is cautiously optimistic about prospects in 2018. Around half predict that profits and headcounts will increase next year and 42% expect an increase in business confidence — a 10% jump from last year’s results.

Chasing Yield

While this optimism is bolstered by an improving macroeconomic outlook for the Eurozone, several issues are still proving worrisome. PwC’s Ilona McElroy added: “The key concern for Europe’s real estate industry centres on the availability of suitable assets. Eight out of ten surveyed believe that investors are taking more risks to achieve target returns; however, many key industry players indicated a more measured approach to risk-taking in 2018.”

The key findings of the report, compiled in conjunction with the Urban Land Instituteare:

  • 42% of survey respondents are confident about business prospects for 2018, compared to 33% last year
  • Eight out ten said that they are concerned about international political instability
  • 56% are concerned about the availability of affordable housing
  • 45% said construction costs would get worse; 48% said that the availability of suitable assets/land would get worse
  • 20% said that returns targeted for 2018 are higher compared to 2017; 36% said they were lower
  • Three-quarters are of the view that long term interest rates will increase
  • Two-thirds said that Brexit will significantly increase real estate investment in Europe
  • 83% are of the view that business relocations to the rest of Europe will increase in 2018 as a direct business impact of Brexit.

 

Photo: CBRE’s Maire Hunt (left), John Bruder of ULI and Joanne Kelly, PwC’s Head of Real Estate

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