Germany, Italy, France and the Benelux countries are the top five European property prospects while Spain, Ireland, Hungary and Portugal are looking more risky, according to Invista Real Estate Investment Management.

In its annual European Property Market Relative Attractiveness report published today Invista ranks countries in Europe according to risk adjusted performance prospects over the next five years.

Top five countries

The top performer was Germany which moved up from seventh place last year knocking the UK market off its first place ranking last year. Italy came second moving up from 11th place. Netherlands retained the same third place ranking from 2007 while Belgium moved up four places from eighth place last year and France, which dropped one place from fourth place last year.

The biggest fall in performance was from former economic powerhouse Ireland which dropped 10 places from fifth to 15th place as investors anticipate an exaggerated slowdown in economic growth in the country over the next five years.

Finland dropped six places from 6th to 12th while the UK which was first last year came in at sixth place. Spain retained the same ranking at 10th place but Invista said it expected its economic growth to slow down in the coming years.

Diversified investment opportunities
Invista said it favoured ‘low-beta’ markets such as Germany and Italy as they offered diversified investment opportunities and returns can be enhanced over the medium term through active asset management.

Poorer performers were the smaller less liquid property markets, such as Portugal, Czech Republic and Hungary, which fell in the rankings with higher levels of expected pricing volatility.

Investors reassessing markets

Invista said the changes to the rankings since last year reflect higher economic and capital markets related risk created by the global credit crunch. It said investors are re-assessing their attitudes towards property pricing and risk but should look beyond volatile short term data and take a medium term view of market performance.

Tim Francis, head of continental European research at Invista, said: ‘The global economic events of the last 12 months have forced investors to reassess their attitudes towards property risk and pricing.

‘Our research indicates which markets are expected to fare better over the medium term, and in our opinion, low-beta markets are better positioned to deliver attractive risk-adjusted returns. Despite recent weak economic data, we believe the German property market should consolidate its position as a key investment target for diversified investors.’