Regulation of Managers and Real Estate Investment Vehicles in Europe

Abstract

This chapter summarises selected tools for the regulation and supervision of managers and investment vehicles in Europe’s real estate market. Defined by a debt or equity product and traded on a private or public market, real estate investments can be carried out in all four quadrants of the real estate investment universe. Due to their higher trading volume, historical experience with them and the fact that they are open to all investors, public and equity products have been in the focus of regulators for a long time now. In the aftermath of the subprime mortgage crisis of 2007-2009, however, supervisory authorities have increased their attention to private and debt products in Europe. In general, regulators and supervisory authorities are continuously working on 1) a sounder, more stable and secure financial system, 2) a harmonised and stringent regulatory and supervisory framework in Europe and 3) a higher level of consumer service and protection. These regulations, however, also incur higher costs for the real estate holding or managing entities. According to the real estate industry, the process of harmonisation and thus the establishing of more and more regulations within the European Union (EU) could lead to an imbalance among the profits of a low-risk asset class, such as properties. In this context, interest groups have expressed their concerns regarding the efficiency of fulfilling the original aim of various regulations as well as the short time frame as prescribed for implementation in their business process. Rather than listing all the regulations which are connected with the real estate industry or all the concerns of the investment and managing industry, this chapter will give the reader a brief overview of the most recent and most relevant regulative and supervisory changes for the real estate industry in Europe.