15.11.2022
STOXX Europe 600, a stock index of 600 European companies from 17 European countries, fell 14% year on year. Its sub-component, STOOX Europe 600 real estate, is down 41% year-on-year. The stock market is “telling us” that European stocks are now worth 14% less than a year ago and real estate stocks are worth 41% less than a year ago. Since the stock market tends to perform more efficiently than the real estate market, it is logical to expect that there will likely be a significant revaluation in the next couple of years as rising interest rates, increased political risk and higher returns from alternative investments are valued in real estate assets.
Real estate revaluations across the continent will have a significant impact on the portfolios of investors, alternative financial providers and banks. Investors should examine potential deals not only from a financial point of view, but also taking into account the macroeconomic factors that affect a particular area or property. While it is hoped that any repricing will be smoothed out as governments cover a significant portion of the increased cost of energy, the bond market has set the stage for widespread repricing of several asset classes. In this turbulent environment, there will be many opportunities for those who take risks to benefit, but the situation in the capital markets remains volatile.
Interesting times are ahead.
Pavlos Loizou, CEO of Ask Wire
