Things to Know About Investing in European Real Estate
European real estate has blossomed in recent years, becoming one of the most attractive regions for investors. Statista reports that industry experts are expecting a return of 5-10% for property investments in 2020, and if you're looking to participate in this exciting market, here are some key things you need to know:
It's a good time to invest in Europe
The reason why European real estate has become such a draw is that the European Central Bank's monetary policy is keeping interest rates artificially low. This makes real estate a particularly lucrative asset in comparison to stocks and bonds, with a potential for higher inflation and a better economy to boost your investment returns even further. Not to mention the US dollar is currently very strong against the Euro.
Historically, tourism-focused real estate investments are strong options for those looking to enter Europe, as just around half of the world's tourist arrivals are in the continent. However, real estate analyst Virginie Wallutis predicts that residential properties will perform well this year too, given a growing urban population that continues to de-cohabitate in most major European cities.
Different cities offer different strengths
Europe is a vast and diverse continent, so it pays to do your research on which areas you'd like to invest in. PwC's report on the ‘Emerging Trends in Real Estate Europe 2020′ reveals that Paris, Berlin, Frankfurt, and London are the most attractive cities to invest in this year, but there are plenty of other markets for investors looking for lower rates and less competition.
For instance, Portugal's coastal city of Porto is famous not just for its delicious food, vast selection of wine and lovely weather, it also has very affordable real estate and a thriving tourist sector — especially compared to Lisbon or any other Western European metropolis. Seville, in the Spanish province of Andalusia, boasts similar attractions. Home to three UNESCO World Heritage Sites and a rich cultural history, Seville provides higher rental yields and cheaper investment properties than better-known cities like Madrid. Similarly, UK cities like Manchester and Birmingham are weathering the recent uncertainties around the exit from the EU and enjoying increased investments.
Property preferences are changing
One key real estate trend today is that European buyers and renters are rejecting grand villas in favor of smaller houses. It's hard to blame them, given that the former are expensive to buy, rent, and maintain, no matter your age or nationality. And with interest rates so low, more and more people are looking to put their money into real estate — and it's good news for those looking to resell property.
Meanwhile, those looking to invest in rental properties would do well to make them energy efficient, as this is a trend that is set to accelerate in Europe and around the world in the next few years.
Plan your finances carefully
Making foreign investments entails knowing the fiscal implications. On top of a property's purchase price, local taxes and additional legal fees must be taken into consideration, so be sure to check with your lawyer and accountant before fully committing to an investment. Foreign real estate investments also involve the choice between getting a local mortgage in USD, or a foreign one in your investment property's local currency. But with the European interest rates so low, it would be wise to go with the latter.
For those with less capital, it's also possible to invest in real estate crowdfunding. French platform Fundimmo is leading the way, raising a total of €33.2 million ($37.6 million) through smaller investors looking to cash in on France's booming real estate market.
Set your property up to thrive
Last but not least, it's important to understand that choosing and buying a property is only half the battle. If you intend on staying in the US while earning from a rental investment, it's best to hire a property management company that can write up contracts, handle maintenance, and collect rent payments, among other landlord responsibilities, in exchange for 5-10% of monthly rent.
It also pays to ensure that your property's fixtures are protected. UK-based home specialists HomeServe highlight how landlords' insurance covers emergencies such as your plumbing and drainage, heating systems, and even the security of your rental properties. Safeguarding your rental investment's future in this way is crucial to ensuring regular rental income and fewer headaches down the road.
The bottom line
All in all, if you're thinking about investing in real estate, then there's no better place than Europe and no better time than today. Of course, just like any other investment, it pays to do your research and plan ahead of time. And to that end, be sure to have a read of our guide to ‘Developing an Investment Plan to Reach Your Goals'.