Investment into European property declined by 19% in the first half of the year as sovereign wealth funds scaled back their activity, according to Real Capital Analytics.
Total investment volume between January and June hit €109.8bn, down nearly a fifth on the same period in 2017.
Cost was a major concern for investors, with pricing in core Western European markets “well above” the peak in 2007, RCA said.
Sovereign wealth funds invested just £237m in the first half, accounting for 0.2% of Europe’s total investment volumes, compared with 4.5% during the whole of 2017.
The UK and Germany, Europe’s two most active markets, recorded declines of 11% and 31%.
The Netherlands, however, bucked the wider European trend with a 17% rise in investment, year-on-year. With close to €10bn invested in the country in H1, the Netherlands overtook Spain as the fourth most active European market.
Despite the widespread fall in investment across Europe, RCA said it has recorded €33bn of deals pending completion, which could lead to an uptick by the end of the year.
Tom Leahy, RCA’s senior director of EMEA analytics, said: “We should see an improvement in the second half, although it’s very unlikely that we shall see a repeat of the record final quarter of last year. Real estate continues to appeal to generalist investors, who are looking for income-producing assets.
“Property is expensive in core markets in historical terms, however, so investors will have to focus on adding value through asset management or targeting markets and sectors where rental growth prospects are good.”
