Research (Professional Only)

European real estate: into the upturn

The eurozone economy has finally turned the corner with an outlook of steady, if unspectacular growth. The key question for real estate investors is whether now is a good time to enter the market?

18 June 2015

Mark Callender

Mark Callender

Head of Real Estate Research

Oliver Kummerfeldt

Oliver Kummerfeldt

European Real Estate Analyst

Tony Smedley

Tony Smedley

Head of Continental European Investment

The eurozone economy has finally turned the corner following a protracted recession which began with the global financial crisis, but was then exacerbated by the sovereign debt crisis in southern Europe.

Last year saw eurozone GDP rise by 0.9% and the consensus is that growth will accelerate to 1.5% this year and 1.8% in 2016.

Focusing on the major economies, Germany and Spain are forecast to lead with growth of 1.75–2.5% per annum, France is expected to track the eurozone average and Italy is likely to lag behind with growth of 0.9% per annum.

Of course, the eurozone still faces challenges. Greece could leave the euro in the next couple of months and any escalation of the conflict in eastern Ukraine is likely to hit business and consumer confidence.

There is also a small possibility that deflation in the eurozone could become entrenched, if businesses and consumers start to defer purchases in the belief that future prices will be lower.

However, while there are clear downside risks, the eurozone economy is significantly stronger now than it was 2–3 years ago.

The majority of governments have completed their austerity programmes and the average budget deficit in the eurozone is forecast to be 2.5% this year, compared with a peak of 6% in 2011 (source HSBC).

The ECB has also established the European Stability Mechanism to protect governments against future liquidity crises in bond markets.

Moreover, the major banks have been re-capitalised and are now starting to lend again, which bodes well for short-term growth (see Figure 1 above).

Finally, Spain and to a lesser extent France and Italy have enacted a number of supply side reforms which should boost their competitiveness over the medium-term.


Important Information: This communication is marketing material. The views and opinions contained herein are those of the author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results. The value of an investment can go down as well as up and is not guaranteed. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. This does not exclude any duty or liability that Schroders has to its customers under any regulatory system. Regions/ sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. The opinions in this material include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change.  To the extent that you are in North America, this content is issued by Schroder Investment Management North America Inc., an indirect wholly owned subsidiary of Schroders plc and SEC registered adviser providing asset management products and services to clients in the US and Canada. For all other users, this content is issued by Schroder Investment Management Limited, 31 Gresham Street, London, EC2V 7QA. Registered No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.