The Case for European Real Estate Debt
November 2020 - 7 min read
The supportive pricing fundamentals in the European real estate market, and low leverage relative to previous property cycles, suggest the asset class is well-positioned to withstand the impact of the pandemic.
- European real estate debt can offer a stable income return and exposure to loans that are secured by fully diversified ‘hard’ collateral—both providing considerable downside protection.
- Rising capital requirements for banks are reducing the appetite for real estate lending and opening up the market for non-bank lenders over the mid to long term.
- When compared to other asset types, property default risk is broadly similar to investment grade bonds and infrastructure, and below high yield corporate bonds.
- Supportive property pricing fundamentals due to long-term low interest rates, coupled with low leverage relative to previous property cycles, suggests the European real estate market is in a position of strength to endure the impact of COVID-19.