The construction and real estate sectors in Europe are "likely to remain under pressure" for the rest of 2012 and into 2013. In an article for the Royal Institution of Chartered Surveyors (Rics) Global Real Estate Weekly newsletter, Josh Miller explained economic factors are likely to subdue the property markets in the near future. Gross domestic product (GDP) in the eurozone is expected to have contracted by 0.2 per cent in the three months from April to June, with the second estimate due to be released by Eurostat on September 6th.
This anticipated reduction in GDP will "feed through to the labour market, thus limiting private sector demand for space," Mr Miller stated. He concluded: "This is likely to put further downward pressure on rents and prices, as well as on construction output over the near term." Earlier this month, Investment Europe reported on Aberdeen Asset Management's outlook for European commercial property, which suggested that capital values will fall over the coming 12 months, particularly in countries in the south of the continent and in secondary markets.
According to Aberdeen Asset Management, the real estate financing sector has become "fragmented", with investors finding it increasingly difficult to source debt funding for secondary assets or those in non-core locations. Director of property research at the firm John Danes stated that the ongoing problems in the eurozone are impacting confidence among both businesses and consumers, adding that short-term measures are not enough as "the fundamental causes" of the crisis have not been dealt with.
Rics senior economist Josh Miller pointed to the European Central Bank's (ECB's) willingness to tackle "sovereign uncertainty" in a more direct manner as a potentially positive move. He suggested that, should the ECB introduce large-scale measures to deal with the sovereign debt issues, it could "remove a key source of uncertainty surrounding the broader euro area economic outlook over the medium term".