Is Europe the Next Real Estate Bubble?

Jul 25, 2017

A new influx of money by French investors into real estate funds could force up the prices on European commercial properties into dangerous highs, according to a new analysis from Fidelity International Ltd.

Bloomberg is reporting that inflows into French collective-investment vehicles that purchase European commercial properties and other assets swelled to $6.5 billion in 2016, a 33 percent spike from 2015. The popularity of these vehicles is based on their higher returns and favorable tax treatments, especially in comparison with traditional stocks and bonds. As a result of this new interest in real estate, the prices for Class A commercial properties in major European cities including Berlin, Paris, Madrid and Zurich now exceed their 2007 peaks.

However, Fidelity is warning that this could pose a potential problem, especially among investment neophytes. Adrian Benedict, the real estate investment director at Fidelity International, claimed that many French retail investors are not “familiar with how this asset class works and believe it can be exited flexibly when required. Their demands for liquidity could easily collide with a reality of forced sales and collapsing returns, or even investor lock-ins when the market turns.”

Benedict added that while the market has not yet reached a bubble level, it is too close for comfort. “We are increasingly cautious; it has all the hallmarks of a bubble which buyers enter at their own risk,” he said.

About the author

Phil Hall

Link copied

Published

Jul 25, 2017

Analysis and Data

Home Sales Are Down, But Deals Are Up

Despite a nearly 12% year-over-year drop in sales, builders keep momentum with quick move-ins and buyer incentives

The U.S. new home market is showing signs of strain, but not surrender. According to Zonda’s latest New Home Market Update for February 2025, national sales are down nearly 12% year-over-year. Yet, the market is still holding the line at an “average” performance, buoyed by a...

People On The Move

Amy Slotnick Takes On Key National Role At Fairway

With over four decades of experience, Slotnick steps into a strategic leadership position aimed at streamlining sales operations across the company

Fairway Independent Mortgage Corporation has tapped one of its most seasoned leaders for a pivotal new role. Amy Slotnick, a 42-year mortgage industry veteran and longtime top performer at Fairway, has been promoted to President of National Branch Optimization – Sales, the c...