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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.

Highlights:

  • 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.
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