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Restricted travel dampening 2021 cross-border investment

Research firm Capital Economics predicts that the recovery in cross-border real estate investment in Europe will be slow in 2021 owing to continued travel restrictions which are expected to last at least into the second half.

The firm said that cross-border flows will not contribute greatly to this year’s overall investment total which is expected to increase by just 5%.

Capital Economics believes that the recent resurgence of coronavirus cases across the continent makes it likely that lockdowns will remain in place until the second quarter of the year. “Even once domestic restrictions are eased, we think that travel between Europe will be tightly controlled with vaccine passports and quarantine requirements likely,” writes property economist Yasemin Engin in a recent bulletin.

Second-half economic hike should help

She said that the increase in economic activity in the second half should help revive investment dealing but the dominant flows will be within Europe. Quoting BNP figures, she points out that while European cross-border fell 20% in 2020, that from North America decline 32% and from Asia the fall was 44%.

Last year the decline in European cross border investment was 23% year on year, with only Hungary and Denmark not reporting declines.

While Capital Economics had forecast that Poland, Romania and Southern Europe would suffer most in 2020 owing to their dependency on cross-border investment, ultimately there was little to distinguish them from core markets. However, France’s 51% fall can be attributed to the particularly high level of investment from South Korea in 2019.

Commercial Property Investment 2020 (%, y/y) [Source: Capital Economics]