Marktbericht Europa Jul09

After the dark clouds from the financial crisis, there is a growing sense that the storm is clearing

Executive Summary

• Sentiment about the economy has improved and growth may return before the end of the year, but there is a danger that the market is getting ahead of itself. Current policy measures are unsustainable and the recovery is likely to be anemic at best.
  
• The banking sector remains problematic. Distressed real estate loans are being restructured in a benign way, but that cannot continue forever. With values nearing a floor, banks are considering ways they might participate in the upside.
  
• Listed property shares have been swept up by a broad wave of optimism, rising 36% since their trough and raising new capital in the process. For the rally to sustain itself, operating fundamentals must stabilize.
  
• Transaction volumes recovered slightly in the second quarter, but remain chronically low. Activity may pick up. Valuations look more attractive and there is some fresh equity around, notably from listed companies and German open-ended funds.
  
• The outlook for the occupier market is poor. Retail and trade volumes are falling and unemployment is rising across Europe. Rents have at least another 10% to fall across the sectors, which will put more downward pressure on property values.