Apparently, real estate investors finally get some sense of reality, when their focus shifts to the main driver of the property value: Rent. The quality of the income stream is key. PropertyEU reports from MIPIM:
With take-up around Europe expected to fall an average 15% this year and rents on the decline, investors are shifting their focus from capital to rental values, according to Etienne Prongue, director of international investment at Atisreal. ‘Rents are set to decline in every market. Today most investors are looking at rental rather than capital values.’
The big theme for 2009 is estimated rental value, agrees Peter Todd, director of London-based property fund Resolution. ‘Property looks cheap in some places, but the quality of the income stream is key. Rents are the next story after capital values.’
While yields are starting to look attractive in the UK and interest rates are at an all-time low, Todd warned that the estimated rental value for London is ‘difficult to call’.
Atisreal’s Prongue views Germany as one of the most stable countries in Europe in terms of rent. ‘Rents have been low for the past 15 years since reunification. The downside will also be low. Economic fundamentals were still holding up in 2008 although they have started to change quite significantly in 2009. It will be interesting to see if pricing levels can be maintained.’
And, what a coincidence: in the same newsletter, the latest CBRE report is mentioned, titled: “European Property: Back To Basics?”:
‘For many investors who found it difficult to identify value in the market over the last few years, this will be a welcome return to a pricing environment in which investors get properly rewarded for taking risks that they can understand and manage, and for adding value to their assets,’ said Nick Axford, head of EMEA Research & Consulting at CBRE and one of the authors of the report.