Walking the tightrope: Real estate investors seeking the right balance between caution and necessary risk-taking

Options for investment in real estate in Europe are shrinking, while the risk of misallocating capital is rising as new money continues to pour in. Investing is thus a balancing act in which the capital side has become a decisive factor. By more actively managing liquidity and constantly balancing lower returns against higher risk, property investors in Europe are attempting to solve the dilemma caused by high levels of available liquidity. Those are the findings of the latest property investment climate study carried out by Union Investment twice a year, which this time involved a representative survey of 161 professional property investors in Germany, France and the UK.

Investments offering lucrative returns remain few and far between in Europe. In fact, 52 per cent of the European real estate investors surveyed do not expect to meet their yield targets in the next three years, as they face continuing high prices and correspondingly low returns. And even taking a five-year view, one in two of those polled are concerned that they will fail to achieve the expected return on investment. Huge investment pressure in the property markets leads to a higher risk of misallocating capital. Strategies must strike the right balance between accepting necessary risk in a zero-interest environment and exercising due care given the many threats.

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