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Eurozone Crisis Weighs on Pan-European Property Funds

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Eurozone Crisis Weighs on Pan-European Property Funds

By - Tuesday 04 September 2012

The performance of pan-European property funds has been negatively impacted by the ongoing eurozone crisis and particularly the performance of real estate assets in locations such as France and Germany. According to the latest IPD Pan-European Property Fund Index for the second quarter of this year, these two markets have had a significant effect because almost half of all the funds' holdings are in these two countries.

In the year to mid-2012, the value of property in France declined by 2.6 per cent and in Germany the drop was 0.2 per cent. While these are considerably lower falls than those recorded in destinations such as Spain (8.1 per cent), Belgium (4.6 per cent) and Portugal (4.1 per cent), they have nevertheless had an impact. Overall, the annual return for pan-European property funds was -0.1 per cent, while the net asset value (NAV) return stood at -1.1 per cent in the three months from April to June.

The IPD report stated: "It is the combination of negative value growth and the impact of leverage that has caused a widening of the spread between direct real estate and NAV returns." However, the organisation pointed out nations that are not part of the eurozone have seen their prospects improve. It cited the UK, where values have climbed by 11.8 per cent in the year to mid-2012 and Sweden, which posted growth of 8.1 per cent in the same period.

Data released by CBRE last month revealed that the UK's commercial property market is beginning to improve. The firm's monthly index found that capital values declined by just 0.3 per cent in July, compared to the 0.5 per cent fall posted in June. Total returns on real estate investments were, however, in positive territory at 0.2 per cent, although this increased to 0.7 per cent when only figures from central London were accounted for.

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