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JLL outlines ‘Grexit’ implications for real estate investments

EMEA, Budapest, 3rd July 2015 - Commenting on the implications of a ‘Grexit’ from the Euro, Andrew Burrell, Head of Forecasting at JLL commented: “Our view is that real estate will hold up well, even if the short term dislocation is dramatic. If a last minute deal cannot be secured, the prospect will be increased volatility, capital controls and rising bond yields, adversely impacting on financial markets. 
“The Greek economy will be hit hardest, though the Eurozone will not be immune to contagion particularly the fringe. It is likely that continued ECB activism will be used to help moderate the severity of the impacts. As a result, post-Grexit, core European real estate markets will continue to benefit from plentiful liquidity and low financing costs. Debt may become more expensive in peripheral Europe in the short term, but not in Germany, France and the UK. Given the turbulence elsewhere, investors will continue to be drawn to real estate for its defensive qualities.

“Outside of the single currency area the direct contagion risks are less, but there will be spill-overs to UK, CEE and Nordic markets given their strong trade links to Eurozone partners. Non-Eurozone Central banks are likely to respond cautiously, keeping interest rates low as long as the economic impacts threaten the current recovery. In relative terms, these economies will continue to outperform. The UK will remain most important for property investor. It has been seen as a safe haven in the past and has the most resilient economy at present, though the situation will be clouded by the Brexit debate.”  

According to Benjamin Perez-Ellischewitz, Director and Head of JLL Capital Markets team in Budapest, the potential impact of Grexit should be minimal on Hungary and can only be the result of secondary effects. “There are no Greek banks in the country, the trading relationship with Greece is not significant and the presence of Greek investors remains limited. The real estate market fundamentals are strong as well as the country macro-economic ones with declining state debt and a budget deficit of 2% forecast for 2015. Nevertheless, the impact could come through the debt market, via the level of debt finance availability and the spreads offered but here again, the liquidity remains so high that the impact will be marginal. As always, as long as investors focus on assets with good fundamentals, and have a clear strategy for those, I am not too concerned” - declared Perez-Ellischewitz.