Ukraine invasion puts political risk back on real estate’s watchlist
Russia’s invasion of Ukraine has put political risk back on the agenda for real estate investors – although a new survey has found little impact on overall investment appetite.
In the latest sentiment survey from the European Association for Investors in Non-Listed Real Estate (INREV) conducted earlier this month, two-thirds of respondents said their assessment of investment risk has increased – a rise from 42% in the December survey.
INREV said the conflict in Ukraine, as well as a “hardening” of the macroeconomic environment, “seem to point toward a new phase in the real estate investment market, driving investors and investment managers to re-assess performance expectations and reappraise strategies”.
Russia’s invasion of Ukraine has put political risk back on the agenda for real estate investors – although a new survey has found little impact on overall investment appetite.
In the latest sentiment survey from the European Association for Investors in Non-Listed Real Estate (INREV) conducted earlier this month, two-thirds of respondents said their assessment of investment risk has increased – a rise from 42% in the December survey.
INREV said the conflict in Ukraine, as well as a “hardening” of the macroeconomic environment, “seem to point toward a new phase in the real estate investment market, driving investors and investment managers to re-assess performance expectations and reappraise strategies”.
Some 38% of investors and investment managers expect the performance of real estate to worsen compared with the past quarter, and none expect a more positive performance over the next quarter. However, 81% of respondents nonetheless plan to invest the same in the asset class as they did in December, and 14% are more confident about increasing their weighting.
Alongside a general shift in risk sentiment, there has been a marked changed in which geographies investors are focusing on. Germany has fallen from the top investment destination in December to second-from-last now. Sentiment towards the UK remains positive, with a fifth of respondents intending to increase allocations.
Iryna Pylypchuk, INREV’s director of research and market information, said: “The unfolding conflict in Ukraine has an indirect negative impact through a weaker economic outlook and an even greater build-up of inflationary pressures which is most likely to have triggered the change in sentiment.
“The greater the geopolitical uncertainty, the lower the business sentiment and performance expectations, even for the real asset classes such as non-listed real estate that tend to weather periods of geopolitical uncertainty relatively well.”
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