A prolonged financial crisis: adjustments and prospects in Eurozone's southern markets

Sotiris Tsolacos (ICMA Centre and School of Real Estate and Planning, Henley Business School, University of Reading, Reading, UK)

Journal of Property Investment & Finance

ISSN: 1463-578X

Publication date: 28 January 2014



The economic slump in the southern member states of the Eurozone has brought real estate market activity to a standstill and has raised questions about the future of these markets. Will they rebound and will they command a higher risk premium? This paper aims to assess the outlook for these markets as the crisis continues and analyses the conditions that are a prerequisite to restore investment activity and a healthy occupier market.


Within a portfolio allocation framework, the paper examines the conditions for the revival of investor interest in these markets and the uncertainties that should be resolved. Through the analysis of selected data, the paper assesses the emerging state of these markets.


The economic slump in peripheral Eurozone economies gives way to a period of slow growth and ongoing structural reforms. The latter are necessary to restore confidence in the respective economies and investment markets. Sentiment indicators contain the first signs of a rebound in business confidence. With confidence returning and mitigated macroeconomic risks investors will seek value in the markets of the southern region on a selective basis. Price corrections and yield differentials with core markets could prove attractive. It is, however, argued that a risk premium will remain to reflect progress with structural reforms that will make the economies more competitive and less prone to a similar crisis in the future. It is only when such reforms will firmly be put in place that pricing in the southern Eurozone markets will reflect cyclical risks and diversification contributions.

Practical implications

The article provides a structured approach to assess the outlook for peripheral markets. It identifies the key risks affecting investor confidence. The analysis proceeds to stress conditions that should be satisfied for a rebound in the investment market. Signals from selected data series are extracted to assess sentiment and adjustment in the market and assist in the assessment of real estate market prospects in these economies.


The paper examines conditions for investing in the hard hit markets of the Eurozone. It illustrates the path for the recovery in these markets and the conditions for the rebound in investment volumes. It contributes to the analysis of the growth potential and risk of these markets for investment purposes.



Tsolacos, S. (2014), "A prolonged financial crisis: adjustments and prospects in Eurozone's southern markets", Journal of Property Investment & Finance, Vol. 32 No. 1, pp. 94-102. https://doi.org/10.1108/JPIF-11-2013-0065

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