Looking to the Continent for inspiration

11:21am Tuesday 11th March 2008

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WITH the negative trend in UK property looking set to continue, focus has shifted towards the continental European markets and their response to the global financial slowdown, says Experian, the global information services company and economic and property forecasting group.

According to the company's latest analysis, the UK will be the only market to see negative returns this year.

"That is not to say there won't be a sharp correction in these countries," said Simon Marx, head of real estate forecasting at Experian.

"Prices for German and Italian offices will readjust this year to match fading hopes of economic recovery, although any other negative price growth in Europe will be negligible.

"This is significantly more positive than Experian's predictions for UK property prices, which include a number of major retail and industrial markets falling by as much as ten per cent in 2008."

According to Experian, the European office market will see total returns of approximately six per cent over the next five years, down by a third on returns since 2004.

Among those markets with the strongest potential going forward are Oslo and Madrid, both of which have been growth areas in recent years.

"But even the top markets are forecast to slow," adds Marx, "with total returns in these two markets ranging between nine and ten per cent this year compared with 14 per cent to 16 per cent last year and 18 per cent to 19 per cent the year before."

Among those markets to see an improvement in their European ranking is the Netherlands. Experian's forecasts for office properties in Amsterdam and Utrecht, and retail assets in Rotterdam and The Hague, have been upgraded since mid-2007. The driver of office returns will be the high levels of income, despite only modest expectations for rental growth.

Retail will be boosted by expected increases in capital values.