* 1 1/2 billion euros wiped off euro zone real estate shares

* Investors question sustainability of ECB-driven rally

* JPMorgan flags 17 pct premium to asset value

By Francesco Canepa

LONDON, March 9 (Reuters) — Over 1 1/2 billion euros were wiped off euro zone property stocks on Monday as investors started to question a 25 percent rally since December, fuelled by the prospect of money-printing by the European Central Bank.

Euro zone property shares have ridden a market rally over the past three months. The prospect of ECB bond purchases, which began on Monday, depressed bond yields and lured investors to the sector — it offers generous dividends and has thrived on low interest rates despite weak economic growth in the region.

Yet property values in the euro zone have so far lagged the equity rally. The stocks are trading at a 17 percent premium to their net asset value (NAV), according to JPMorgan estimates. By comparison, UK real estate stocks trade at a 4 percent discount to NAV and enjoy better economic conditions in Britain.

The STOXX Europe Real Estate index was down 1.8 percent at 1351 GMT, leaving its market capitalisation at 85 billion euros, after JPMorgan analysts downgraded five stocks in the index. Among them were the Netherlands’ Unibail Rodamco and France’s Klepierre.

It’s clear to us that the UK offers better value at current levels and we can still buy on fundamental property reasons, JPMorgan analysts wrote in a note. We see 12 percent upside (to share prices) in the UK and just 1 percent upside on the Continent.

UK real estate shares were also under pressure on Monday, however. They fell 1.3 percent as investors worried about the growing likelihood of a U.S. rate increase, which would affect borrowing costs across the world.

MEAGRE GROWTH

Euro zone real estate companies have been able to pay out generous dividends despite meagre or no rental growth thanks to low borrowing costs in a near-zero interest rate environment.

With a dividend yield of 4.8 percent, the sector yields 210 points more than the broader Euro STOXX index of euro zone shares. It yields 440 basis points more than Germany’s 10-year sovereign bond, Europe’s most widely used bond benchmark, Datastream data showed.

Analysts warned this means the sector’s rally lay on the shaky grounds of relative returns. Those are subject to hard-to-predict changes in interest rates across the world, rather than on economic growth, casting a shadow on its longer-term prospects.

It’s financial market-driven strength, and although there is a very large cushion, at some point. it poses some risk, said Ruud Van Maanen, an analyst at ABN Amro. (Reporting By Francesco Canepa; Editing by Larry King)