As economies in Europe hit the doldrums, property markets are also feeling the pinch. With real estate markets from Ireland to Spain turning from boom to bust, Germany is emerging as property investors' new safe bet.
A survey of real estate industry experts released on Monday finds that conditions across Europe look set to get gloomier in 2009. However, some cities are less risky than others when it comes to buying real estate. And in these troubling times, the wealthy Bavarian capital Munich is looking like a good place to buy.
The report "Emerging Trends in Real Estate Europe, 2009" published by PricewaterhouseCoopers (PwC) and the Urban Land Institute asked over 500 industry experts about their forecasts for 27 cities in 2009. While prospects were deemed to have fallen across the board, the survey found that Munich and Hamburg were the top tips for property investment. In fact four German cities, the others being Berlin and Frankfurt, are included in the report's list of Top 10 cities.
According to the report, Germany was seen as "less volatile with more long-term investors." "The German real estate market is becoming more attractive in the crisis," Helmut Trappmann, head of real estate at PwC, told reporters in Frankfurt on Monday. "Acceptable returns make the risks considerably lower here then in the boom regions in earlier years."
The survey respondents ranked Munich as top of the league due to a number of favorable economic factors: The city has seen a decline in unemployment, its population is growing fast and it is also experiencing a hike in consumer spending. Munich is also regarded as having a diverse economic base which makes investment there less risky. In contrast, Frankfurt, the capital of Germany's financial sector, is expected to be affected by the banking crisis and fell back from seventh to 10th place in the list.
The biggest slide was Moscow which fell from the top spot in 2008 to sixth place. London has, meanwhile, emerged as a more attractive investment opportunity due to the falling prices there. It has leaped from 15th on the list in 2008 to fifth for 2009.
One of the biggest problems facing property investors is the short supply of capital. Although plummeting prices could provide attractive bargains, banks are proving highly reluctant to lend.
John Forbes, a real estate executive with PwC, told reporters that 2009 would be a tough year for investors. "For those who bought at the top of the market it could be a struggle for survival, particularly if banks become more aggressive in dealing with covenant breaches."
|Europe's Top 10 Cities for Real Estate|
|Rank||City||Value||Ranking in 2008|
|The value is based on the expected returns from investment in real estate on a scale from 1 (catastrophic) to 9 (excellent). Source: PricewaterhouseCoopers.|
smd -- with wire reports
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