Tranio: 5 main trends of the international real estate market
What is the world real estate market? What changes await him in the future? Tranio International Real Estate Broker presents an overview of the main trends that investors can already focus on today. Germany – “safe haven”
Germany remains one of the most popular countries with international investors. According to the UN, the inflow of foreign direct investment in the German economy in 2017 amounted to 34.7 billion dollars – two times more than in 2016. The total value of foreign assets in Germany in 2017 was estimated at $ 931.3 billion – 18% more than in 2016. Over the past 20 years, this figure has tripled.
The real estate market in Germany has a reputation of “safe haven”: a square meter has been rising in price here over the past ten years. According to consulting company PwC, in the third quarter of 2017, the volume of investment in commercial real estate in Germany broke a new record, reaching 39.5 billion euros, which is 20% more than was invested during this period a year earlier. Most buyers are local investors (55%), followed by buyers from Europe (22%), North America (12.5%) and Asia (9%).
Residential Property Price Index
The main drivers of demand for investors in German real estate:
cheap financing: foreign real estate buyers can get a mortgage in a German bank at 1.5-2% per annum, which will cover up to 70% of the value of the object;
security of the buyer and seller: all processes relating to the purchase, maintenance and sale of the object, are strictly regulated;
stable economy: the last five years, the German GDP has been growing steadily, in the second quarter of 2018, taking into account inflation, the growth was 2.3%; Germany’s unemployment rate is 3.6% versus an average Eurozone of 8.4%.
the increase in population in large cities: from 2011 to 2018, the number of Berliners increased by 10%, Hamburg – by 7%, Munich – by 8%, Frankfurt – by 12%.
High demand for German real estate stimulates a rise in prices and a decrease in rental income. In search of higher returns, foreign investors are moving towards value-added projects or are considering small cities where a square meter is cheaper than in already heated markets.
According to the Bank of Greece, the inflow of foreign direct investment in Greece in 2017 amounted to 3.6 billion euros – almost a third more than in 2016, and three times more than in 2015. The volume of private investment in Greek real estate also reached a record high: in 2017, the total value of transactions with foreign investors amounted to 328 million euros – two times more than in 2016, and 2.5 times more than in 2015.
the influx of foreign direct investment in Greece in 2017 amounted to 3.6 billion euros – almost a third more than in 2016
Four reasons explain the interest of foreign investors in Greek real estate:
golden visa: Greece offers a residence permit in exchange for the purchase of real estate worth from 250 thousand euros – this is the most inexpensive program in the EU;
low prices: while a square meter in Greece is cheaper than in other European capitals. Now the market is at the lowest point of the cycle, but it is starting to grow: the Bank of Greece records the rise in prices for residential real estate for the second quarter in a row;
a record flow of tourists: in 2017, according to the Bank of Greece, more than 30 million travelers from abroad visited the country;
Positive changes in the economy: Greek GDP is growing for the fifth quarter in a row; in August, Greece successfully completed the third program of macro-financial assistance. The international rating agency Fitch raised the long-term foreign currency rating of Greece in two steps at once: from В to BB-.
Due to the still low prices for real estate and high demand, investors in Greece receive a higher return on invested capital. Thus, the net yield from short-term rentals in Athens is 5–7% per annum versus 3% in most European capitals. But the main potential is the increase in the value of real estate: on the horizon of the next 2-3 years, it should be at least 20–30% of the purchase price
Malta and Cyprus – at the peak of demand due to passport programs
For several years, Malta and Cyprus have been issuing passports to foreign investors in exchange for investments. A prerequisite is the presence of local real estate, in Cyprus – from 500 thousand euros (or from 2 million – then there is no need to invest in other assets), in Malta – from 350 thousand euros, or the investor can rent the property at a price of 16 thousand Euro per year for 5 years. Passport programs are popular with wealthy foreigners: since the launch of the program, Malta issued more than 550 passports to main applicants, and Cyprus, according to The Guardian, more than 1000 in 2017 only.