Valuation: investment market
After 2007, when property investments reached a record level, the financial crisis, and in some countries the economic crisis, in 2008 had a negative impact on the volume of property investments, primarily in the second half of the year. The total volume in Europe amounted to € 110 billion in 2008, less than 50% of the volume in 2007. In the final quarter of 2008, the total volume was as low as about € 16 billion. The European markets where investments fell most sharply in 2008 were Germany (-65%), France (-57%), the UK (-55%) and Spain (-45%). The initial reason why many investments were not made was the difficulty that investors and developers faced in obtaining loans from financial institutions that had run into trouble. This brought an end to the downward pressure on yields (initial yields) of recent years. As a result, investors, in turn, became more cautious while anticipating a further increase in yields and pending greater availability of financing.
The increase in yields for property investments varies from one country to another, depending on underlying economic developments and structural imbalances. In some countries, such as Spain, the financial crisis already had an effect on yields in early 2008, partly through a correction of the overheated housing market. In other countries, such as Turkey, the indirect impact of the crisis was not felt until the final quarter of the year, with fairly sharp and abrupt yield increases. Apart from general market trends, the local market situation and property features such as location and the mix of tenants were determining factors for individual performance. Towards the end of 2008, many countries were in economic recession or facing the threat of one. Despite the fact that the consequences of the financial crisis were evident in the investment market in 2008 in the form of yield increases and lower values, the consequences of the economic recession had not yet materialised in most tenant markets. Generally speaking, rents were still rising in 2008, particularly for A1 locations and first class shopping centres that are dominant in their catchment areas.
Source: Annual Report 2008, Chapter Review of operations, page 43 (PDF, 2,1 MB)
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