European real estate close to recovery - UBS
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EUROPEAN REAL ESTATE CLOSE TO RECOVERY - UBS
While the central banks move toward softening their monetary policy, investors are wondering whether the dark times for European real estate are over, after a long period of high interest rates discouraged investment in properties.
"The recession phase (for REITs) could be over," UBS analysts said in a note on Tuesday. "If bond yields remain at current levels, if companies' message that values have bottomed is verified and if the Federal Reserve starts cutting this year, the real estate sector could be entering recovery".
They believe that a compression in long-term interest rates of 25 basis points could boost portfolio values by 5% and net asset values by 8.2% for European real estate companies.
"This would be the natural next stage of the real estate cycle, following a downturn that has seen values correct by an average 15% for Europe and recent stabilisation in property yields", they added.
As of July, property yields were stable in 89% of the markets compared to 40% at the start of 2023, according to UBS, which tracked 596 European real estate markets and sectors.
After two quarters of losses, the European real estate index .SX86P has risen by around 5% since the beginning of July.
(Matteo Allievi)
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