European credit crisis

Emerging European markets will continue to see strong demand, while investment activity in real estate is likely to slow down across the UK, Ireland, Spain and Germany. The slow down has been triggered by investors moving away from traditional European financial centers in the wake of the global credit crunch, according to the Royal Institution of Charted Surveyors' (RICS) Global Property Survey, published on December 3.

The real estate sector in Western Europe saw moderation of investor demand as early as the first half of 2007, with the growth in investor activity significantly decreasing in London, Madrid, Frankfurt and Dublin. This trend is likely to intensify with a fall off in demand.

However, according to the survey, Eastern European countries are unlikely to be affected by the credit turmoil and are expected to continue to outperform Western European countries. Moscow and Istanbul are likely to see the greatest growth in capital values, followed by Budapest and Warsaw.

"The latest survey provides further evidence that a decoupling of emerging and developed markets has occurred in recent years, although current optimism could wane should credit market turmoil persist through 2008," said Oliver Gilmartin, a senior economist at RICS, commenting on the survey results.

The optimistic position of Eastern European countries is mostly due to their booming economies.

Anna Kapica-Harward