Investing in European Real Estate



You’ll find many articles about foreigners investing in U.S. real estate but what about Americans investing in foreign real estate? Besting NYC, London is now ranked the number one investment city in the world by many experts including the Association of Foreign Investors in Real Estate (AFIRE). Although the U.K. does rate number three among the best countries for real estate investing, Germany takes second place behind the U.S. on the global scale.

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photo credit: Werner Kunz via photopin cc

The European market is different from our own market. During the recession, the European debt crisis was more severe than ours and took substantially longer to recover. The result has been little recovery in the real estate markets until recently. Investors looking for the best risk-reward opportunities should take a look at European real estate.

What to Expect From the European Real Estate Market

As a whole, European real estate transactions are on the increase.

  • The European debt crisis is no longer causing the real estate market to decline.
  • Experts expect all European real estate to be attractive to international investors for the remainder of 2014.
  • Most European countries expect to see an increase in the supply of real estate during 2014.
  • Commercial mortgages backed by securities are expected to begin rebounding this year.
  • Investors are beginning to take more risk and speculators are beginning new developments in some markets.
  • Investors are expecting a mixed bag for prices in different European markets. The hardest hit markets are expected to see the largest bounce back in prices while those markets that recovered from the recession the earliest have likely already topped out on price recovery.

European Real Estate Trends

Global capital is returning to Europe with steep competition for the best buildings in the tier one gateway cities. Even southern Europe, Spain in particular, is seeing a resurgence of investor interest. Last year, Spain was a complete no-go region. Two of the hottest markets are Munich, Germany and Dublin, Ireland.

Most foreign investment capital is coming from Asia. The other big inflow of capital is coming from both of the American continents. As 2014 continues, both major foreign sources of capital are expected to increase. However, European banks are similar to the U.S. banks in the fact that they are not making many loans. That will keep competition for properties lower than if more capital was available.

Munich and London have likely top out in price growth as the top investment zones in Europe. Secondary markets such as Stuttgart, German are now seeing more growth from both investors and renters than the primary markets.

Risk is On

Many international investors believe that with recovery from the financial crisis comes the best time to take risk in a recovering economy. After seeing the U.S. real estate market make fast strides in recovery, these investors are anticipating a similar recovery in Europe. An annual increase of between 10% and 15% is forecast for the next couple of years and then real estate values can be expected to stabilize going forward.

This article is only a general overview of the complex European real estate market. Fully understanding the market requires in-depth research. Along with research, a good strategy would be partnering with some one deeply knowledgeable about a particular market you are interested investing in.

 

Brian KlineAbout the author: Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years. He also draws upon 25 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest in the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.

Comments

  1. This is a good list.

    I was wondering if the reduction in value of a primary residence as a result of the 2007-08 financial crisis can be claimed as a casualty loss for income tax purposes. I bought a house in the 2007-08 time period (at the height of real estate valuations) and now the house is worth a lot less than I paid for it. I can quantify the lower valuation from annual property tax bills – taxes have been reduced based on the tax assessor’s analysis. Any comments?

    • Brian Kline says:

      I’m not a tax expert. I suggest that you explain your situation to an accountant or attorney that specializes in real estate. However, I don’t think you can write off the loss until you sell the property.
      Brian Kline