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The European real estate sector is holding its breath in the face of a 55% decline in property investments, according to a report by PwC.

According to the annual Emerging Trends in Real Estate Market report, presented on Thursday by the consulting firm PwC and the Urban Land Institute, the European real estate sector is experiencing a staggering 55% drop in investments, revealing a concerning trend for market players. However, Spain emerges as an exception, showing greater resilience than most countries in the region, with Madrid standing out as one of the most attractive cities for investors.

 

The report, considered an annual barometer of the real estate sector, compiles the opinions of nearly 1,100 CEOs and executives from European companies, providing a representative view of their concerns. According to the results, the main concern has shifted compared to the previous year. Now, 86% of respondents declare themselves "much" or "somewhat" concerned about interest rate movements, while inflation is cited by 83%.

 

Despite slight optimism compared to the previous year, uncertainty persists in a market "besieged by inflationary pressures and rising interest rates." Real estate investment in the 19 analyzed European markets has decreased dramatically, reaching 181 billion, representing a 55.4% drop compared to 2022 (406 billion). Northern European countries lead the losses, with declines exceeding 70%, while Spain, with an investment of 13 billion and a 31% decrease, shows relative resistance. Only Portugal (-3%) and Belgium (with a growth of 10%) present more favorable results, albeit in significantly smaller markets.

 

The gap between the price expectations of buyers and sellers in various locations is identified as the main cause of this decline, according to Antonio Sánchez-Recio, Partner in charge of Real Estate, Construction, and Services at PwC. The report points out a "widespread fear" in the sector of "catching a falling knife," referring to assets rapidly decreasing in value in a context of increasing financing costs. The international scenario also contributes to uncertainty, with the war in Ukraine, tensions in the Middle East, and the risk of political shifts to the right in some European countries.

 

However, investors continue to focus their attention on major cities, and Madrid has climbed to the third position in the ranking of the most attractive European cities for investment, highlighting its growth, attraction of immigrants, students, and tourists, as well as its "relatively strong economic growth" and friendly business environment. On the other hand, Barcelona descends to the tenth position in this edition, while German cities experience notable setbacks.