Germany tops property risk reward outlook

SWIP's research analyses the European property market on a risk-adjusted basis and finds that Germany remains at the forefront, with the best sector outlook over the next five years being in high street retail and retail warehousing.

Looking across all sectors and countries in continental Europe, total returns are expected to slow for the remainder of the year before picking up in 2010. Overall, the most vulnerable markets are those more heavily exposed to consumer debt and to the financial services sector.

The credit crunch is expected to continue to affect investor sentiment throughout 2008 and 2009. Cross border investment continues to be an important feature of the European property market but SWIP's research has identified that investors have become far more selective. SWIP expects the trend for purchasers to focus on prime stock with good tenants to continue as quality remains crucial to property investment in Europe.

Robert Matthews, Head of International Property at SWIP comments: "The European property market is creating some interesting dilemmas for investors. We expect the demand for quality to continue as investors look for solid returns in difficult economic conditions. However, as prospects decline in the core Western European markets, this may encourage some investors to consider less mature markets such as Moscow where prospects are stronger, albeit at a higher risk.

"Our research into the Central European markets highlights that total returns and rental growth prospects do not tell a complete story. As with any investment, the potential reward must be balanced with the risks. Our research includes analysis of liquidity, currency risk, transparency and volatility of the sector to establish a more thorough picture of the market. Under this analysis German cities dominate the list."