Lower oil prices, a less stringent monetary policy and a weaker euro are all likely to mean fairly stable growth for property investment in the Eurozone this year*.

The quantitative easing programme has been received positively by the investment community and we expect the property markets to demonstrate a similar reaction.The probable devaluation of the euro against other world currencies may also attract more capital from cross border investors which could, in turn, lead to further competition for good quality assets, and yield hardening.

There is also some evidence that oil price volatility encourages Middle Eastern investors to hedge by investing in property which will further interest in core locations (UK, France and Germany).

Prime yields for the best commercial property assets have already increased by 30-40 bps year on year, and we forecast that in 2015 they will harden further in at least 50 per cent of the commercial property sectors/markets that we monitor across Europe. 

The total investment volume in the EU15 (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, UK) last year was slightly less than €185bn - 26 per cent above the previous year. We expect the total turnover to increase by 5 per cent year on year in 2015, with the best performers in terms of annual growth of activity likely to be Italy (55 per cent), Germany (13 per cent) and the UK (6 per cent).

In the medium term, the low interest rate will continue to underpin high capital allocations into the European property market and drive yield compression. What remains to be seen is how fast the economy will respond to these incentives and how soon the fundamentals of the occupier markets will improve.

The main risk at the moment is the uncertainty about the future of the Eurozone and the impact of a potential 'Grexit'. However, if the Greek government and European Commission/IMF/ECB can find a mutually beneficial solution, this risk will be reduced. 

* Focus Economics Consensus Forecast Euro Area Feb 2015.

Savills at MIPIM

Visit Savills at Zone A Riviera. Each day we will present a daily report from the show, focusing on the retail sector, the commercial sectors in the UK and the residential investment market.