''The market had been picking up, partly thanks to banks lending again'',says Eric Sasson, who heads up the European operations at The Carlyle Group, the private equity firm. "But the Greece crisis put a hold to that. Having just got out of the freezing zone, banks went cold again – and some deals got delayed."
Concerns over the European markets have also kept international investors away. While the U.K. has attracted many big-ticket sovereign wealth funds and quasi-national pension funds from Asia and the Middle East over the past 12 months, the rest of Europe has been dominated by domestic institutions and property companies.
"There was a massive globalized real estate market in 2007," says Pierre Vaquier, chief executive of AXA Real Estate Investment Managers. "But then afterwards there was a 'flight to home' – as people wanted to go where they understand best."
Signs of a true recovery have therefore been seen in just a few core cities – markets that sovereign wealth funds and institutions know and understand: Primarily London, Paris and the five main German cities. For the first three quarters of 2010, investment volumes in the U.K., Germany and France accounted for two-thirds of all investment turnover in Europe, according to Jones Lang LaSalle.
online.wsj.com
As a tested market that has endured with investors, Reynolds, in her PIGS-versus-BRICs comparison, attests that despite the somewhat deceptive figures, European property still may be the way to go when it comes to investment. "On the face of it, the emerging economies look a better bet, however they will need resources to grow, both money and raw materials (witness the spate of lead thefts to supply China with base metal requirements). Some emerging markets have not yet got a proven, 'foreign property buyer' track record. Sustainability of the domestic, property markets will also be a key question to bear in mind, as well as how foreign property buyers are treated by regulation."
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