Investing Abroad? Experts Are Watching These 10 Property Markets
Getting a healthy return on your property investment, especially when that money is in real estate in a foreign country, can take some doing.
By spending time doing your own global research, examining market trends and economic projections, you’re off to a good start. Investment advisors would be the next step, of course, and possibly networking with local realtors and bankers who have a grasp of the day-to-day market realities.
We’ve started you off with an overview of 10 markets you may want to consider for your next property investment abroad.
The North of England
A report by global real estate service provider Savills indicates that commuter villages outside of urban markets are strong, both in terms of demand and projected increased values. The research team forecasts “prime values across the north of England will grow by an average of 18.2% over the five years to 2020, as the local economies strengthen and buyers become more aware of the comparative value this region offers, particularly regarding higher value properties.”
Last month, house prices across most of England and Wales increased by 8.9%, setting new records and being seen, Shane Croucher of the International Business Times writes, indicating “that the market has now fully recovered from the crash.” He also adds that “concerns over a ‘Brexit’ in the [June 23rd] European Union (EU) referendum will weigh on demand.”
In March, the UK agency Your Move reported Scotland was experiencing “the highest January sales since 2008, up 24% year-on-year.” Buyers were snapping up properties to avoid the 3% Land and Buildings transaction tax contained in the December budget; however, Your Move’s managing director in Scotland, Christine Campbell, wonders whether this surge is only the “tip of the iceberg.”
While average Scottish house prices were up by just 0.8%, in Stirling “property values in the area have jumped 13.5% over the past year.”
Kai Enders, a board member at global luxury estate company Engel & Völkers, posted an interview in May in which he talks about the impact of location on prices of even the most expensive properties. Enders says investors will find substantial differences in market values among Germany’s biggest cities.
For example, in Munich, the country’s most expensive city, you’ll find a property listed at 1.2 million EUR, whereas in Frankfurt, a top price might max out at 700,000 EUR. Knowing which areas within those cities to invest is crucial for pricing: One-third of the top-end transactions were in the Bogenhausen suburb of Munich, while in Hamburg you’d need to be in the Elbe suburbs or on Alster Lake.
With recent new building development, the luxury residential market in Germany has seen more property availability, which could be a negative factor. However, Enders says “demand remains very strong due to lack of investment alternatives and low interest rates.”
He adds that he expects this to remain the case for the foreseeable future and anticipate prices will rise. “In other words, the premium market is set to see strong momentum in the future.”
The Romanian Commercial Real Estate Conference (CEDER) this year finds that the country’s property market is strengthening across all sectors. As CIJ Europe writes: “Romania’s growing economy is fueling the development of nearly all types of real estate, including office space, logistics and retail. New office and warehouse space will continue to be built as developers in both sectors continue to believe that the strength of demand will support a considerable level of new supply.”
The housing market seems to be just as healthy, according to Fly2Let, an information and advice portal for overseas property investors. The team writes: “For savvy investors wanting to add to their property portfolio, the rising number of sales in Bucharest indicates upwards movement in the sector. Though the current information is transactional data and not value increases, it nevertheless points to Romania as a market worth looking into.”
Deep-pocketed investors who understand the fluctuations that occur in a small market will be pleased with the findings of Savills World Research, as reported in PropertyWire in May. Consistent growth has been seen in the ultra prime property market since 2010, averaging 5.8 percent yearly.
The report says “Monaco continues to be an exceptionally attractive location for the global wealthy and has all the key ingredients for real estate price growth,” explaining that “high demand for both residential and commercial space meets with slow supply in an extremely land limited area.”
There’s good news from Spain, too. Lucas Fox, in its Market Reports Q3 & Q4 2015, cites a prediction from The Economist’s that says “property prices across Spain will rise by 6% until the year 2017.” The report identifies Madrid as the fourth best European city for investment potential, and Barcelona isn’t far behind at No. 12.
On the company blog, partner Tom Maidment calls lifestyle investors a “growing breed of demographic.” These overseas buyers invest for purposes not only of capital growth and rental yield, but also lifestyle benefits, of which Spain offers many.
As Lucas Fox co-founder Alexander Vaughan tells Everything Overseas, “The more traditional second home locations of Marbella and Ibiza, where the market is almost entirely dominated by international buyers, are continuing to perform extremely well with particularly strong results for new developments. Perhaps even more encouraging for the Spanish property market as a whole are the signs that prices in the three main cities, Madrid, Barcelona and Valencia, have stabilised and are beginning to slowly increase.”
With no restrictions on foreigners buying property and no taxes on these purchases, investment in residential and commercial real estate in Andorra is on the rise, according to the property market review 2016 at All Andorra.
Known for its great skiing, the country welcomes some 2 million tourists annually, and with a permanent population of just 75,000, that works out to just more than 32 visitors per resident. Investing in a rental unit near the slopes can see a return of up to 15 percent.
Sotheby’s International Realty agrees that Andorra is a welcoming place for investors to consider. Inducements include a “personal income tax rate ranges between 0.5% and 10% (at the very most); and the corporate income tax rate is 10%, with reductions of up to 80% for strategic investments.”
In the Property Market Outlook 2016 for Portugal by Land & Houses Algarve, one line stands out: “Foreign buyers of property in Portugal continue to enjoy a double whammy in 2016; a weak Euro and depressed property prices.” With a property market a full third below its previous high in 2008, the steady average increase in values of 5 percent in 2015 are expected to be as much as “7 to 9% higher” in 2016.
Kate Everett-Allen, an international residential research specialist at Knight Frank, says the area’s “continual investment in infrastructure” helped boost economic confidence, which in turn is responsible for increased sales volumes and higher property values.
According to the Portuguese Housing Market Survey, as reported in the Portugal Resident in February, rents have “grown in the last eight months in Portugal after several years of decline.” Simon Rubinsohn, a senior economist with the Royal Institute of Chartered Surveyors, is of the opinion that “with the national economy improving, the (property) market is in good condition to resume its recovery in the months ahead.”
There’s some debate about the property prices in Hong Kong. While leading the way last year in increased value (up more than 16 percent in the second quarter), property prices are now said to be in a high holding pattern. Goldman Sachs predicts by 2018 residential property values could be down by 20 percent.
Still, South China Morning Post financial writer Peter Guy, who is a former international banker, says: “Hong Kong’s property market for new flats is rigged in favour of the property tycoons who can withhold their massive landbanks, delay development and slowly release completed flats into the market. Like any squeeze in the stock market, prices may be down, but volumes aren’t high.”
The prestige property market in Melbourne is picking up, writes Domain’s Alice Archer, with the areas of Toorak and South Yarra gaining particular interest. In fact, Melbourne property developer Larry Kestelman says is sure that the penthouse apartments in his South Yarra luxury tower, Capitol Grand, will exceed the previous record purchase price of 25 million AUD (or 30,000 AUD per square metre).
When it comes to prime residential property, Domain turns to the Knight Frank Prime Residential Property Index, which shows Sydney is expected to outperform Melbourne in terms of prime residential property. According to Knight Frank Director of Residential Research in Australia Michelle Ciesielski , “Sydney prime is expected to remain the best performer, although the pace of price growth is expected to slow from close to 15 per cent year-on-year in 2015 to 10 per cent in 2016.”
ABC New Australia business reporter Michael Janda writes about the ripple effect being felt in several property markets within commuting distance of these major cities. One example he gives is that of “the Illawarra region south of Sydney, where house values rose nearly 16 per cent over the past year and units more than 13 per cent.”
Even in centers considered too far for a daily commute into Sydney, prices have been on the rise. Newcastle, for instance, “saw an 8.1 per cent rise in house prices and 6.3 per cent climb for apartments.”