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Investor confidence fuels plans to expand in 'safe haven' properties

24 January, 2014

Despite economic and political turbulence, global real estate investors will be more willing to take risks in 2014 in ‘heaven safe’ markets, a trend that was evident in the investment volumes in Greece last year.
Investor confidence and expectations of increasing transactional volumes are anticipated to improve, according to the results of the “Global Investor Sentiment Survey Report” by Colliers International http://www.colliers.com/en-us . Overall, the survey found optimism about the economic outlook for 2014 and with the increased confidence, many investors are planning to expand.
Globally, investors are willing to take more risk in future investment decisions, with 70% planning to expand their portfolios in the next six months. A decision more influenced by property fundamentals and yields instead of sovereign and political risk. From this context, U.S. buyers are the most ambitious as steady improvement in the progress of property investment turnover is expected in 2013 and 2014.
In EMEA, with bright prospects for 2014, 61% of investors surveyed expressed their plan to expand their portfolios and increase their exposure to property. Opportunities are found especially in secondary markets with assets in need of capital expenditure and repositioning, despite recent political turmoil and economic uncertainty. Approximately 87% of EMEA respondents agreed that, “good investment opportunities exist in the global market, but are increasingly difficult to find.”
Property fundamentals remain the most important investment criterion to EMEA respondents, followed by economic growth. Sovereign risk scored second-highest globally behind Asia. The effect of the ongoing debt crisis on risk premium remains high between core and peripheral European markets despite recent improvements in economic and political sentiment.
Many investors cited difficulties in finding good investment opportunities, despite having plenty of capital. As a result, competition is growing in stable markets as investors strive to maintain secure returns. A large amount of capital is flowing from high-risk nations into more liquid safe-haven markets, especially gateway cities such as London, Tokyo, Sydney, and New York which remain popular destinations for both cross-border and local capital.

KEEP CAPITAL DOMESTIC
Despite increased risk appetites, most survey respondents prefer to invest in markets close to home, with only 10% looking outside their domestic region for investment opportunities. Respondents from the three EMEA territories examined (Western Europe, CEE and MENA) source the majority of capital in their home regions. If they look outside, Western Europeans look to the UK and US, CEE Russia-Turkey look to Western Europe and the US, and MENA looks to Asia. For all investors, Germany is the preferred European target market, followed by France.
Investors looking at these countries are prevalently based in Western Europe and the UK, underscoring the domestic bias of capital flows.

COST OF DEBT RISES
The majority of EMEA respondents (59%) plan to use debt in the future to leverage purchases. This is a decline from the 2012 response (76%). Most respondents (61%) saw little change in underwriting standards over the last six months, but 33% report that debt costs are up and 46% anticipate further increases.
Some 61% of EMEA investors plan to expand their portfolios, up marginally on 2012 (59%). Globally, the EMEA expansion ambitions are near the bottom of the table, just above Latin America (56%).

HUNGRY FOR GREECE
In Greece, the hunger among investors for real estate assets and their appetite for risk was evident in their investment activity in 2013, with the investment volumes anticipated to reach over 1 bln Euros until the end of the year. Most activity was concentrated on the privatisation projects, followed by the hospitality and office sectors.
“Investors from US, Middle East and the EMEA region targeted Greece in 2013, while domestic investors were also more focused towards the domestic market,” said Ana Vukovic, Managing Director Colliers International Greece http://www.colliers.com/en-gb/greece , “Property fundamentals (prime assets) remained the most important investment criteria for investors, which combined with the pricing adjustments as a result of the crisis, led to turnaround in the country’s attractiveness.”
If Greece continues to show signs of economic and political stability, 2014 will be a year with bigger flow in investment volumes, similar to the ones depicted in Italy and Spain during 2013. Then it will see a bigger activity from the EMEA region investors in Greece.