Investors who are putting their money into eurozone real estate markets should be demanding higher risk premiums due to the potential repercussions of the sovereign debt crisis, it has been claimed. A report released by AEW Europe and investment bank Natixis calculated the "average probability risk yield premium" that should be taken into account across different European property markets to convey the likelihood of each country exiting the single currency.
For instance, the study did not apply such a premium to Germany, the Netherlands or Austria due to their stable public finances. However, it recommended a risk premium of ten basis points for France and Belgium, while 375 basis points was suggested for Greece. Madhi Mokrane, head of research and strategy at AEW Europe, stated that investors should be "demanding" these higher risk premiums.
He added that his firm anticipates "non super-safe yields will be rising across the board in the eurozone by year-end unless a convincing solution to the crisis is found to satisfy financial markets". Last week, CB Richard Ellis revealed that global real estate investors are focusing their attention on a small number of core markets on the continent, with London attracting the highest volumes of capital, followed by Paris, Berlin, Moscow and Frankfurt.
- Tuesday 11 October 2011