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Fair Value Index Q1 2019

Riccardo Pizzuti

Senior Research Analyst

Phone +44 203 296 2409

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The European Fair Value Index score was 24 in Q1, up from the Q4 figure of 16, reflecting an improvement in the attractiveness of prime opportunities across Europe. 

In many of the Eurozone markets we delayed our first property yield increase from 2020 to 2021 to reflect the more dovish monetary policy environment. As such, our capital growth expectations have improved. In addition, the combination of bond yield compression and a lower illiquidity and risk premium component has increased the spread between the fair and forecast return, improving property attractiveness. Nevertheless, the majority of our 123 markets covered in the analysis are classified as fully-priced.

The most opportunities can still be found in the logistics sector rather than retail and offices which have more fully priced markets than fairly or under-priced. 

Geographically, the CEE, Germany and semi-core have the most under-priced markets while core markets such as the UK and France have more fully priced markets.

What is the Fair Value Index?

The Cushman & Wakefield Fair Value Index was launched in August 2010 and covers 123 markets across Europe. 

 Fair value is the value at which an investor is indifferent between a risk free return and the forecast return from holding property, taking into account the extra risk of investing in the property asset class.

 When a property price is at fair value, an investor is being adequately compensated for the risk taken in choosing to purchase real estate; similarly, when the property price is below the fair value price, an investor is being more than compensated for the risk taken in choosing to purchase real estate. When buying at or below fair value, an investor does not necessarily buy at the bottom of the market.

 Our Fair Value analysis focuses on prime assets and a five-year investment horizon, and hold for the market overall; individual transactions may provide opportunities and risks beyond the average market view. In the report, we compare results for the current quarter with the previous quarter, which may differ from those published in the previous quarter’s report; this is due to the forward-looking methodology. As such, when our forecasts change so too does the Fair Value Index.

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