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H1 investment “solid” in circumstances: Savills

Real estate investment in Europe fell 47% in the second quarter of the year to €36.2 billion, its lowest quarterly volume since 2013, according to Savills.

But the firm points out in its European Investment Spotlight that thanks to a strong start to the year, the total volume for the first half was €118.9bn, only 1.3% down on H1 2019, “which is a relatively solid result given the pandemic situation”.

Germany, was the most resilient country, with turnover up 31.5% compared to the first six months of last year – an additional €10bn. Investment turnover also increased in Luxembourg (173.1%), Portugal (42.2%), Czech Republic (11.2%), Poland (4.6%) and Romania (3.2%).

The most severe falls were in Ireland (-44.5%), Norway (-38%) and Italy (-29.5%).

The lockdown restrictions took their toll on cross-border investment, which accounted for 44% of the total compared to 47% in the corresponding period last year and was down to 33% in the second quarter.  However, Savills points out that recent months have seen increasing activity from investment managers and more joint venture acquisitions and entity deals that enable international funds to invest abroad.

And although Asian investment activity in Europe has been “rather muted”, American funds remain active.

Savills expects deal volumes to be low in the third quarter too, owing to restrictions on the ability to inspect property and delays in the due diligence process, but the firm says investors’ appetite for European real estate is undiminished because of the increasing spread with long-term interest rates.

The final quarter could reveal a bounce back, the firm says and it estimates the volume for the year will be between €220bn (-29% yoy) and €260bn (-16% yoy) if the health crisis does not deteriorate further and any second wave can be contained.

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