Responses to the Q1 2022 sentiment survey conducted by the Commercial Real Estate Finance Council Europe between 5 January and 26 January suggest there is optimism among the property finance professionals polled by the industry body, albeit coupled with concern about rising inflation and the political environment.
According to David Dahan, industry initiatives director at CREFC Europe, the survey results show something of a stabilisation in sentiment, compared with the previous set of quarterly results.
“The comments we received from respondents, describing their views on the market, were overall positive,” he says. “However, an analysis of the responses to the survey questions showed the positive momentum that we saw in Q3 and Q4 last year has slowed.”
Dahan stresses this does not mean a significant rise in those feeling negative about the market. Rather, fewer people felt more positive than they did in Q4 2021. The number of responses indicating no change in sentiment was up across the data, which Dahan says still indicates there is a generally positive mood – but that fewer felt markedly better about conditions than they did in Q4.
“The overall data was still positive, but more tempered than in Q4,” he adds.
CREFC Europe calculates a sentiment index score for the responses to individual survey questions, by subtracting negative responses from positive responses and stripping out neutral responses, to provide a single data point which can be tracked quarter-by-quarter to indicate the overall change in sentiment.
Dahan believes factors tempering the positive mood include rising inflation and political uncertainty. “In the UK, there is uncertainty over Boris Johnson’s future and concern about another leadership challenge. In Continental Europe, there is some uncertainty about the direction Germany will take after the end of the Merkel era. In France, an election looms in April. Overlay the situation in Ukraine and it makes for a less stable political environment.”
Concern about covid appears to be diminishing, Dahan adds. “Covid is, in the eyes of the debt and equity communities, largely behind us, and people are more optimistic about the potential for real estate such as offices.”
Overall, the data shows minimal change in sentiment towards individual property sectors. It also shows risk appetites were largely unchanged when analyses by respondents’ appetites towards risk related to property type, locations, and lending strategies. “It indicates people are not taking more risk, even though there is the suggestion the market is competitive,” says Dahan.
Describe in a few words how you feel about the market
“A high number of development projects which were put on ice during the pandemic are now being pushed forward and are likely to result in a strong market for lending in the UK.”
“Inflationary pressures and the wobbling of the stock markets suggest trouble ahead.”
“Lessening impact from covid, improving market sentiment because of that. Political instability currently a concern.”
“Markets have signs of stress. Distress has not yet come into play, but it will.”
“New normal as pandemic transitions to endemic.”