Investment in the UK Real Estate market is open for business post-Brexit, according to the European Real Estate global survey by international law firm DLA Piper. The survey of 500 investors, developers, and asset managers with more than USD3 billion AUM from across Europe, China and the US, ranks the UK highest for future residential real estate investment.
Overall the top five countries for investment in residential assets over the next 12 months is the UK (33 %), France (28 %), Germany (25 %), Spain (24 %) and Italy (18 %).
Signalling that the market is attractive for future investment, nearly three-quarters (74 per cent) of respondents plan to invest in European residential assets over the next twelve months. Of these, nearly one third (29 per cent) expect to invest more in 2021 compared to 2020, on average increasing assets by nearly 30 per cent. When investing, the majority (88 per cent) will also choose to enter new countries in partnership with a local developer or manager.
Traditional residential assets are the preferred haven choice for most investors, with nearly three-quarters (71 per cent) managing build or own-to-lease properties, while half (51 per cent) maintain student living premises and two-fifths (44 per cent) senior and retirement living spaces.
Despite the lingering COVID-19 pandemic and uncertainty over the shape of recovery, more than half of respondents (55 per cent) feel positive for the outlook of the European Real Estate market - with only (11 per cent) feeling negative. Those headquartered in China and the EU5 are the most positive, 66 per cent and 57 per cent respectively.
The top reasons respondents cited as causes to be optimistic were that there is high demand due to a shortfall in supply (43 per cent), real estate income yields are higher than those for fixed income (43 per cent), and asset prices remain attractive (40 per cent). For those respondents that remain negative, concerns over the pandemic and more lockdowns (64 per cent), the recession impacting demand (51 per cent) and the fact that the real estate market lacks daily liquidity in comparison to equity and bond markets (46 per cent) were cited as the three main reasons.
Commenting on the findings, Olaf Schmidt, Real Estate partner and Managing Director of Practice Groups at DLA Piper, says: “Investment in European residential real estate assets has been traditionally considered a market for local investors and it was largely dominated by local asset managers. High barriers to entry due to the existence of different national market practices and legal systems made it difficult to enter this market. However, over the past few years this has changed. Residential developers went international, asset managers have created teams specialised in the residential market segment, institutional capital opened up, and asset managers can now invest in the various forms of residential assets across Europe.
“Today’s findings show that despite the ongoing challenges of the COVID-19 pandemic, the European Real Estate market remains attractive because of its strong fundamentals, low interest rates, and high potential yield returns compared to equity markets. The UK remains an attractive market for investment also post-Brexit which should provide confirmation and reassurance that the UK is a vital hub for activity and growth.”
