Thai investors looking to diversify their real estate portfolios should consider property in Europe, according to new research from Credit Suisse Asset Management. The bank believes the region’s market is in a favourable position with regards to the cycle of returns.
This has been a noteworthy decade of economic performance in Europe due to shifts in both the political landscape and real estate markets of the region. There has been a noticeable economic recovery in many countries since 2013 and this, along with the lessening political risks, has made Europe an attractive place for real estate investment.
“We anticipate that economies in the euro zone will continue to strengthen in 2017. Countries like Spain, the Netherlands, or Ireland are expected to record above-average growth, while the German economy remains robust as the unemployment rate is at the lowest level since German reunification. Due to the uncertainties emanating from Brexit, UK growth is likely to be weaker but still at a level of above 1 per cent,” says Zoltan Szelyes, Head of Market Research at Credit Suisse Asset Management, to the Bangkok Post.
Property prices have rebounded in the past few years while income yields in commercial and residential real estate properties remain in decline. According to Credit Suisse Asset Management, net income yields in fully leased properties at central locations in Europe’s largest cities are currently 3 to 4 per cent.
There is also not much in terms of construction activity in markets like Spain and the Netherlands meaning there is potential for value-added strategies that can provide real estate investors with higher risk-adjusted returns. These can include investing in buildings that undergo refurbishments or repositioning to draw in new tenants.
“Such strategies are illiquid during the life of the investments, and investors need to have a time horizon of 5 to 10 years as business plans need to be executed. Such investments provide a typical return pickup compared to core investments and are, in our view, appropriate in the current environment of a more solid European economy ” says Szelyes.
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