EUROPE - European transaction volumes in 2010 are expected to exceed those of last year following results from a survey that finds risk appetite has increased among institutional investors in the UK, Germany and France.

Union Investment's Investment Climate index, which tracks attitudes and expectations among European real estate professionals at six-month intervals, has reached 67.5 points, equalling the most recent high point in August 2009.

Union Investment said this showed a greater willingness to invest compared with the second half of 2009.

Olaf Janssen, head of property research at Union Investment, said: "The index is approaching the previous all-time high of 68.7 points, recorded in 2007."

The biggest increase in investor optimism was measured in Germany, where sentiment rose from 66.1 to 67.8 points, overtaking the corresponding values in both France and the UK for the first time since autumn 2008.

The climate index fell slightly, by 0.8 points, in France to 67.5, and was down 1 point in the UK to 67.2.

Janssen said: "The recovery in Germany is proving surprisingly strong. It reflects a high level of investor confidence in the performance of the domestic market."

A clear majority (58%) of German investors surveyed anticipated a significant rise in investment demand from abroad over the next 12 months, with 63% of German investors expecting the investment climate to continue improving over the same period.

More than half of French investors (59%) were also positive about the performance of their home market, but UK investors were more sceptical, with only 34% believing the climate for real estate investment in the UK would continue to improve in the short term.

A smaller proportion (27%) of UK investors actually expected the market to deteriorate, while 71% expected the crisis in Greece to impact current transactions in Europe.

"Expectations of negative fallout from the crisis in Greece are very pronounced among UK investors, and this has affected the mood," Janssen said.

"Investors are clearly willing to raise their risk exposure in exchange for higher returns.

"This indicates a sustained revival in the European investment markets."

The survey, conducted by market research institute Ipsos, involved 185 decision-makers at property companies and institutional real estate investment firms in Germany, France and the UK.