As the woes of the Euro continue there is no doubt that many people believe that the European economy will be in the doldrums for many years to come. On the surface they could be right with the economy struggling, property prices in freefall and many banks holding distressed real estate assets which they will jettison at the first opportunity. However, if you believe the euro will survive, which it inevitably will, is now the time to start bottom fishing the European property market?
Distressed sellers cast a dark shadow
It is common knowledge that Spanish banks for example still have billions of euros of property on their books which they acquired inadvertently when their clients reneged on loans. There have been some fairly sizeable corporate to corporate deals involving these properties but there is still a lot more to hit the market at some stage. Many people may assume now is not the time to invest but if you look towards the medium to long term, do you see us revisiting current property prices again?
If you believe that property prices at the moment will look attractive in 5 to 10 years then perhaps you should consider building your exposure to the market?
Check the rental yields
In many property markets across Europe prices have fallen to such a level that rental yields more than make up for any possible short to medium term fluctuations. The exact figures will vary from market to market but compared to the prime London property market, where some properties yield less than 3%, there would appear to be some good value across Europe. Investors may have to wait a few years to maximise their returns but if they can secure a rental yield approaching double digits then surely this is enough comfort in the short term?
As ever, investors will need to look at their own particular situation, their own cash flow and their own investment strategies before taking advice and investing. At this moment in time the dark clouds are hovering over the European property market but let’s not forget that the darkest hour comes just before the dawn.
Those who obtain the best returns in the worldwide real estate market are investors who can sometimes see beyond the short term doom and gloom and recognise value before the market turns. The fact is that you will never buy at the bottom and you will never sell at the top but building your exposure on the way down and reducing your exposure on the way up has made many real estate investors extremely wealthy.
It would be wrong to suggest that ignoring short-term negative issues is easy, and sometimes your timing may be off, but property investment in particular is a long-term game. When you also take into account the relatively low interest rates available across the European markets there may well be some excellent value loans available for those with some kind of collateral.
As we mentioned above, the darkest hour is always just before the dawn and sometimes it is very easy to get caught up in the moment and not to appreciate the medium to long-term situation. We are not suggesting that the European real estate market will recover overnight, it may take a number of years, but if you do your research there is some good long-term value out there – with rental yields to support any short to medium term asset price fluctuations.