In the quarterly sentiment survey of its members in Q2, CREFC Europe recorded a clear negative response from property finance professionals to US President Donald Trump’s April announcement of trade tariffs.
The industry body’s latest survey, conducted between 1 July and 29 July, indicates the outlook has become more measured in the interim. “The Q3 survey is looking more positive than last quarter,” says David Dahan, industry initiatives director at CREFC Europe.
The sentiment index score measuring attitudes to overall market conditions increased from Q2. Dahan suggests this is due to respondents’ initial reactions to tariffs being replaced by more nuanced analysis of how global trade friction is playing out. “I think people are realising Trump is serious about tariffs but he’s also using them to negotiate outcomes.”
The improvement in the score for overall market conditions, Dahan explains, is driven by 51 percent believing conditions have improved in the past three months, up from 33 percent last quarter, and just 16 percent saying conditions have deteriorated. Dahan notes a third of respondents believe conditions have not changed since Q2, tempering the improved mood.
For Dahan, the results show respondents are more confident about property market fundamentals. They feel somewhat better than last quarter about the macroeconomic environment, partly because of the continued fall in interest rates. Meanwhile, geopolitics remains a concern, albeit to less of a degree than was evident in the Q2 survey.
“If you look at the macro factors, the sentiment index score for real estate fundamentals is bouncing back into positive territory,” he says. “The macroeconomic index score has improved, even though it is still negative. There is still concern about the economic environment, but it’s less pronounced than last quarter.
“The political environment index score is also in better shape than last quarter, but it is still negative and hasn’t improved to the same degree as the macroeconomics score. The political environment is still fragile.”
New business
The sunnier outlook for property market fundamentals, despite the volatile backdrop, is likely driven by the perception of more transactional activity, says Dahan. “The sentiment score for volume of new business has bounced back nicely, so there’s a sense people feel the market has priced in the risks and is proceeding with transactions.”
The survey results revealed little change in how respondents feel about the prospects for individual real estate sectors, with moderate improvement for offices and retail and largely unchanged sentiment towards industrial and logistics.
Similarly, attitudes towards risk have not changed markedly between quarters, notes Dahan. “Overall, I would say market participants are more risk-off than risk-on.”
Describe in a few words how you feel about the market
“Polarisation: All lenders on the same transactions that tick the boxes”
“Less impacted by tariffs than expected”
“A never-shrinking bid/ask gap that is keeping the market in a deadlock”
“Need transaction volumes to pick up meaningfully”
“Coming out of some turbulence but the captain hasn’t turned off the fasten seatbelt sign, yet”
“Extremely bifurcated. Bank activity pushing leverage and squeezing margins”
“Better times are still six to nine months away – as they have been for nearly three years!”
“Ultra-competitive, strong competition and pricing/lending terms being sacrificed”
“Mildly optimistic overall but apprehensive about where pricing seems to be heading”
“Still not meaningful alignment of vendors and buyers – implies asset values still need to fall. Student and resi over-bid”
