The ongoing problems in the eurozone continue to shape investment activity and returns in the real estate sector. This paper considers the merits of investment in real estate in the current economic climate and assesses the prospects of the main real estate markets and sectors across Europe. In terms of the current situation in the eurozone, fiscal retrenchment remains a key theme, albeit to differing degrees. Fiscal austerity and depressed demand are most prevalent in those countries that have lost their competitiveness and are now facing a debt crisis, such as the peripheral economies of Spain, Portugal and Greece. These countries have produced large current account deficits and accumulated excessive amounts of debt in both the private and public sectors. In contrast, the stronger countries have tended to be those with budget surpluses, with Germany standing out as the strongest example and to a lesser extent, Netherlands, Austria, Belgium and Luxembourg. These countries have run current account surpluses, reflecting both better relative competitiveness and a persistently high savings ratio. However, the economic prospects for the eurozone as a whole this year are weak with fiscal retrenchment in evidence across all eurozone economies.
Source : UBS AG