The “deep freeze” that gripped European property markets after a spike in borrowing costs worsened at the start of the year, with deals fell to their lowest levels since 2011.Bloomberg reports.
Real estate transactions totaled 34.5 billion euros in the first quarter of 2024, a 26 percent drop from already low levels a year earlier, according to data compiled by MSCI Real Assets and cited by the agency .
This represents the seventh consecutive quarterly decline as uncertainty over when central banks will cut interest rates continues to drive a wedge between the price expectations of property buyers and sellers.
What is the return on investment in property
Office properties, which make up the largest portion of the commercial real estate market, led the declines in transactions in the first quarter, with volumes down 45%. Figures for Paris were particularly bleak, with the French capital recording its worst quarter for office sales, with just eight deals totaling less than €500m, the data showed.
Higher interest rates have triggered a sharp correction in European property markets, exacerbated by changing work patterns and increasing environmental demands, which weigh particularly heavily on older office buildings. But as interest rates are expected to start coming lower in the coming months in view of easing inflation, many potential sellers are holding onto their properties in the hope that prices will soon begin to recover.
“After a very slow 2023, there were hopes that European property investment would start to pick up in the first quarter of 2024,” said Tom Leahy, MSCI’s head of real estate research. “But the ongoing and sometimes painful readjustment to the end of historically low interest rates means the market remains a difficult place to transact,” he added.
How much does it cost to rent an apartment, studio or room in Europe?
Although most sellers stuck to their retrospective book values and resisted price reductions, some had no choice because the maturity of debt payments or the expiration of the financing term. This has gradually created enough transactional evidence to push property values lower, raising expectations that the market will soon find a bottom and volumes may begin to pick up.
But uncertainty over the timing of rate cuts has extended misguided expectations, with some suppliers now more confident that prices will recover, even as offers continue to reflect increased borrowing costs. MSCI’s modeling found that there is still a 20% gap between asking prices for London offices and the achieved values of completed deals.
For more financial news and other useful tips about your personal finances, you can follow us on Facebook or Google News Showcase
Tags: Property deals Europe collapsed Properties
-
