King Sturge's March report "European Property Investors & Bankers Survey 2008' paints an interesting view of the credit crunch, its consequences and, most interestingly, where banking and commercial property investors' money is and will be going.

OK, it's commercial property investment, but, as we've always said - where the big money goes, so follows residential property demand.

The key is that this survey and those like it, tracks where the capital flows are heading, which means the same as where the growth will be in this region.

The survey, carried out in January and February of this year, was of 54 property investors and bankers, who control funds worth €130billion and €265billion respectively.

The separates the views of bankers and investors, which show some variance.
What is clear, though, is that there is a fairly optimistic consensus on interest rates this year and on a recovery in commercial property markets.

Projected change in short term bank interest rates in 2008 compared to 2007
About 90% of investors think the current collapse in capital values (of commercial property) will have ended by early 2009, and 70% of bankers agree.

This would seem to be pretty much this the same as forecasting the end of the credit crunch, or at least its bottom.

On interest rates -

A cut by 25 basis points or more

42% of bankers think Euro zone interest rates will fall by 25 basis points or more this year and 30% of investors. If the majority are righ, that means a strong euro throughout 2008.

64% of bankers think the Bank of England will cut by 25 points or more, but only 35% of investors.

On the US, 67% of bankers and 50% of investors believe rates will fall by another 25 basis points or more.

So, a disparity of views there.

Less so on where the best opportunities will be in Europe.

So where will be the best opportunities in Europe?

The study finds that investoirs and bankers think the UK and Germany offer the best returns (in the UK's case, also potentiall the worst) .

So, as the survey poses the question - have some parts of the UK already reached a value floor from which growth will develop? And, by extension, will residential follow suit?

One other feature that stands out - new central and eastern EU countries are where bankers and investors have the highest confidence about economic growth in 2008 - by far!

And, as the survey says - 'It is well known that property returns correlate well with economic growth.'