EUROPE:

In line with the global slow down, the economies of Western Europe are also decelerating. For the moment, their occupier markets remain fairly robust, with healthy take-up in retail and logistics and, to a lesser extent, offices. However, forecasts for future growth are being downgraded and surveys of economic sentiment are now at their lowest level since mid-2005, suggesting future rental growth is set to weaken.

In the investment markets, yields continue to move out, particularly in Spain and Ireland. To date, the correction across Europe has been far less dramatic than that seen in the UK. This is partly due to pricing being less stretched initially, but it also reflects sellers not yet being willing to crystallise lower prices. This, combined with financing being difficult and costly to obtain, has led to a sharp contraction in transaction volumes compared to the same period 12 months ago.Economic forecasts have been downgraded steadily over the past quarter for almost all the major world economies.Policymakers are struggling to steer a course between inflation and economic weakening. US policy makers have sought to focus on defending the economy through aggressive interest rate reductions whereas, in Europe and parts of Asia, the focus has been on controlling inflation by raising interest rates. Linked to this is a general crisis of confidence and desire for risk aversion amongst banks, which is both reducing the availability and increasing the cost of credit. In this environment, both businesses and manufacturers are struggling to grow and, for much of the world, consumer confidence is being undermined by worsening job prospects and falling house prices. Even Asia is feeling the pinch. Confidence in the view that the region had, by virtue of its intrinsic dynamics, gained a measure of immunity from wider economic travails, is fading.

Read the full PRUPIM articles here:

International Real Estate Perspective PDF