European real estate valuations could face double-digit falls next year as the sector continues to be volatile and unpredictable, James Wilkinson said in the final session at the EPRA Conference in Paris this week.
BlackRock’s European chief investment officer for real estate said the European market could suffer falls in value of between 10% and 20% next year, although the spread between high and low performers made region-wide conclusions misleading.
Markets could react strongly to wider policy changes, he said, pointing to the 10% fall in UK stock values that followed a June 2014 speech by Mark Carney in which he hinted at a possible interest rate rise.
Wilkinson said: “I could describe some plausible scenarios for why the whole of Europe is down by 20% in 2017.
“Is it so far-fetched that we start talking about normalisation of interest rate policy or a change in monetary policy in the eurozone at some point in 2017? That could move the markets by 10% to 20%, just like that.
“We see more upside from the Asia-Pacific than from the US or EMEA, but averages are a pretty terrible way to judge things. Within each region there is huge divergence.”
Wilkinson said that the spread in European property companies’ returns could range from -25% to +25% next year, depending on the quality of asset management.
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