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European housing prices to stabilise: report

The research house’s latest European Residential Property report said that over the past decade real growth rates in residential property prices in Sweden, Austria, Switzerland, Norway, and Germany have ranged from 20% to over 50% due to unprecedented financing conditions, dynamic population rises, economic growth and relatively low construction activity.

However, at the beginning of the year, reports were calling Sweden’s housing slump the worst since the Global Financial Crisis.

“A major reason for recent price corrections in Sweden, Norway, and Switzerland is the significant expansion in apartment supply in the last three years,” the report said.

Scope said the current price corrections after years of real price growth was not unusual, and that robust economic and demographic conditions would ensure that residential property prices in Oslo, Stockholm and Zurich would continue to stabilise this year and increase moderately again from 2019.

Scope Investor Services director, Manfred Binsfeld, said: “A decline in residential property prices that threatens the economy and financial system is possible in the event of a severe recession or a massive, sudden rise in interest rates. Both scenarios are unlikely”.

The report noted that the decline in housing prices should not be confused with the bursting of a speculative bubble due to “overly optimistic expectations or irrational exuberance”.

“Speculative construction is not widespread across Europe. The only exceptions are the high-price segments in several attractive global cities such as London, Paris or Munich,” it said.

Top European property funds

According to FE Analytics, over the last three years to 30 June 2018, the European property sector has not performed well. In the Offshore Mutual universe the funds returned 4.7% and lost 2.2% within the FCA Recognised universe.

The funds in these universes returned between 31% and -33.9% over the same period.

The top fund was Cohen and Steers Sicav European Real Estate Securities fund (31%), followed by Janus Henderson Horizon Pan European Property Equities H2 (26.9%), ING Direct Mattone Arancio Distribution (24.5%), NNIP’s European Real Estate X Cap (22.5%), and BMO Global Asset Management’s F&C Real Estate Securities Fund (20.5%).

Top European property funds performance three years to 30 June 2018

Property funds 3 yrs to 30 June 2018

Source: FE Analytics

Since the start of the year, all of the top funds’ performance has dipped (see graph above) but picked back up in mid-February.

The Cohen and Steers fund has its highest country weighting to Germany and UK (both 27%), followed by France (21%), Spain (11%), Sweden (6%), other (5%), and Norway (3%).

Similarly, the Janus Henderson fund also had its highest weightings towards Germany and UK (31.8% and 28.2% respectively), followed by France (9.3%), Sweden (7.6%), Netherlands (7.5%), and Spain (6.6%).

Both funds had the highest holding towards Germany property firm Deutsche Wohnen.

The top funds were found using FE Analytics that were domiciled in either Luxembourg or Ireland and with either the FCA Recognised or Offshore Mutual universes.

Jassmyn Goh

Jassmyn reported from Sydney to New York to Jakarta before joining Expert Investor. She was most recently Features Editor at Money Management and Super Review in Sydney.

Part of the Mark Allen Group.