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). However, NYC and London have become overly competitive and probably won’t deliver the level of returns that could come from secondary markets.
The subject of the Great Recession is getting old. However, different portions of the world economy were affected differently. This is a major reason to be aware that there are great real estate investment opportunities in far-flung places. Although the U.S. economy is mostly recovered from the recession, other parts of the world are just now regaining economic health.
Among the major secondary markets to be studying are Paris, Berlin, Frankfurt, Tokyo, Sydney, Melbourne, Hong Kong, and Shanghai. Within these markets, the hottest properties tend to be large apartment complexes and prime retail with office space also being attractive.
The European market is different from our own market. During the recession, the European debt crisis was more severe than ours was and took substantially longer to recover. The result has been little recovery in the real estate markets until 2015. 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.
- More than 550 real estate experts are more bullish on the European market today than they were in 2015.
- Experts expect all European real estate to be attractive to international investors for the remainder of 2016.
- Interest rates remain low and rental occupancy remains high meaning return on investment can be expected to remain high in much of Europe.
- In recent years, investing in Europe mostly required equity. Today, more is being financed with debt.
- Top investors continue taking more risk and speculators are beginning new developments in more 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. Among the hottest markets today are Madrid, Munich, Copenhagen, and Dublin.
Most foreign investment capital is coming from Asia. The other big inflow of capital is coming from both of the American continents. Going forward, 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 topped out in price growth as the top investment zones in Europe. Secondary markets such as Stuttgart, Germany 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.
Please leave a comment if this article was helpful or if you have a question.
Author bio: 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.