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LONDON-Money Into Property, a report by DTZ Research, finds there will be no lessening of the capital market’s downturn in the next twelve months and recovery will likely not be seen until 2011. In 2008 alone, Euorpean investment volumes fell 52%, while European-related cross-cross border investment declined 59% and fund coming to Europe from elsewhere nosedived by 76%.

“DTZ forecasts, based on a mainstream macro-economic scenario, are for headline rents to continue sliding across the region through 2009 and 2010; total returns are forecasted to be around -20% this year and only slightly positive next year,” the report states.

DTZ’s Tony McGough and Magali Marton compiled the report.

According to an earlier survey conducted by DTZ, lenders will continue to tighten their purse strings; with plans to reduce net lending throughout 2009 and 2010. Nearly 60% of the investors surveyed do not expect a sizable recovery in the debt markets until 2011. “The message coming out from the lenders survey is that for 2009 and generally into 2010, conditions are going to remain extremely difficult, with cost of debt rising, its conditions tightening and lenders volume retrenching, particularly in their non-core geographies.”

Likewise investors expect transaction volumes to continue to fall throughout Europe as there has yet to be a significant repricing of assets to fuel a “hunting season.”

Investment volume totaled nearly $14 billion in the first quarter of 2009. This is a large decline from the peak of Q2 2007 when investment volume was more than $85 billion. Overall in 2007 investment volume totaled $320 billion, falling to $154 billion in 2008 and expected to see a further large decline by year end.

McGough and Marton expect to see assets repricing in the next 12 months to fuel a buying trend. London City is, however, the exception to this, having begun to see the start of investors looking to purchase. London’s West End, Paris and Madrid are expected to be the first to follow suit in the next 12 months.

Money Into Property used research from 24 countries in Europe; and is the longest running report DTZ publishes, having been around since 1975.

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