While the UK property market continues to perform strongly, it is also seeing a period of uncertainty due to interest rate hikes to 5.5 per cent and the recent debacle over the introduction of Home Information Packs, which have both put a dampener on the residential market.
Although high demand for property in Britain may well keep prices ticking over, investors unwilling to take a risk or those looking for the highest return on their investment are seeing these push factors coupled with tempting opportunities in Europe.
Property prices on the continent continued their upward surge last year, according to the Pan-European property index from Investment Property Databank. Clearly good news for current property investors, but coming on the back of similar growth in the two previous years it suggests there could be substance to suggestions that the Euro market will offer opportunities into the future.
Although the UK was among the top six performers in terms of total returns, it was not alone in performing well and was joined at the top of the index by Ireland, France, Denmark, Sweden and the Netherlands, while Italy, Portugal and Norway showed good growth in residential rental returns.
But commercial property too has been enjoying a continental-flavoured boom, clearly shown by the recent spate of big-money deals. The start of the year saw the Coeur Defense office complex near Paris briefly top the rankings as Europe's biggest ever commercial property deal after it was sold for $2.8 billion (£1.42 billion).
Although this was quickly eclipsed by the $3.8 billion (£1.92 billion) HSBC headquarters sale - which was helped by London's unique place in the market - it suggests that commercial property has entered a highly attractive period for investors.
This was confirmed by more results from the Investment Property Databank in May which found that the value of investment property including retail and office space in western Europe had grown by 7.8 per cent, with Ireland performing outstandingly with growth above 20 per cent.
Reasons for this success include the strong performance of the Euro zone against the dollar and big companies selling off properties due to shareholder pressure.
French supermarket giant Carrefour has been under pressure to offload some of its portfolio, while German insurer Allianz alone has cut loose $4.1 billion of property, including the European Central Bank building. Governments too have been feeling the squeeze and have sold off property to combat cash flow issues.
The upshot of these sales is that large numbers of investment opportunities have opened up across Europe in recent months, which has boosted commercial property activity.
But further to this, new investment has been flowing into Europe through Real Estate Investment Trusts (Reits) which have been recently launched in Germany and France, as well as Britain.
The relative youth of these trusts means there is substantial room for growth, with fund manager Fidelity International predicting by 2011 there will be a 70 per cent increase in the number of properties held under schemes like these, in comparison to the 2005 level.
But what is the best country in which to look for Reits investments? For Steve Buller, manager of the Fidelity Global Property Fund, the answer has to be Germany.
He told a recent conference: "Germany holds particular interest at the moment. It is the third largest economy in the world but one of the least securitised property markets.
"Although it has the largest bank of property in Europe it currently has less than 0.5 per cent of commercial buildings owned by Reit-like structures."
Germany's office sector is made more attractive, Mr Buller added, due to the low numbers of new offices being built, coupled with improving take up rates of those on the market, which is boosting potential yields. But if Germany is seen by analysts as a key opportunity in terms of commercial property, there are also those suggesting that it looks no less inviting for residential investors.
According to Dominic Farrell of Jet-to-Let magazine, Germany remains a "sleeping giant" as residential property even in the capital Berlin is very cheap in comparison to other European cities. Large apartments in some of the trendier areas of Berlin can go for just £110,000 – or around £1,500 per square metre, according to the magazine.
For UK investors more used to London prices of £15,000 per square metre, such low initial costs are very attractive – especially when offset against rental income. And with around 60 per cent of Germans currently renting, there is a big market to which to offer a let – prompting the editor of Property Investor News magazine Richard Bowser to tell Jet-to-Let that "residential property values in the medium to long term are likely to go only one way."
However, Germany is not the only European country being touted as a ripe investment opportunity.
Emerging markets like Bulgaria and Cyprus may pose more risks for the careless investor, but they can also offer lucrative returns. Bulgaria's improving transport links and its growth as a tourist destination has seen investors flock to snap up property at bargain prices. These opportunists are likely to see a return on their decisiveness, according to Irini Tzortzoglou, the head of retail banking at Piraeus Bank in London.
"As the market matures, prices are rising to reflect the increased price of land and improved specification of the properties, therefore we are seeing higher selling prices," she said.
Cyprus meanwhile is also seeing prices rise due to its booming tourist industry and improving connections due to the major upgrades taking place at Larnaca and Paphos airports.
But despite the opportunities available on the continent, one former European investment favourite is not faring so well. Over-development in Spain has led to falling property values in many areas, while government plans for community projects have been exploited by some developers - resulting in some 20,000 properties being reclaimed on the Costa Blanca and the Costa del Azahar.
Although some analysts suggest parts of the Costa del Sol still offer attractive opportunities, property owners are also facing crackdowns on unlicensed building work and undeclared rental earnings, adding a further reason why investors are less inclined to turn to the Spanish market.
However, with a substantial expatriate community and more amenities already in place than some emerging markets, Spain may still attract those looking to invest in a second home or cater purely to holidaymakers.
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