European countries have recovered from the last financial crisis impressively over the last decade. Many of them are almost back to pre-crisis economic growth rates. This means that there is more money in their economies and with that higher demand for products in their economy including real estate.
Real estate, a once depressed sector in many European countries is now one of the leading and most profitable. This is as a result of the resulting high demand from foreign investors participating in the real estate investment for citizenship programs.
The high demand has led to significant improvements in these sectors amid other changes. Here are some of the emerging trends in real estate in Europe.
Increasing demand from foreign investors
Foreign investors have shown significant interest in Europe’s real estate market. This has been driven mostly by the rising demand for golden visa programs that are predicated on real estate investment for residency and eventual citizenship in the European countries.
High net worth individuals from countries in the Middle East, China, Brazil, South Africa, and other emerging countries have applied to the program in droves. Most of these individuals are not just looking to move to Europe – they are expanding their investments and this route comes with a European residency benefit.
This residency permit allows you as an investor to live and work in any EU country and enjoy the benefits of EU citizenship. Also, the value of the real estate investments is rising as more and more citizenship seeking investors flock into the country looking to buy a property.
The golden visa program requires that those who gain residency through it own their holdings for the length of the residency. It varies in different countries, but five years is the minimum. With a growing economy, when the residency period lapses, the value of the property will have risen.
Further, the residency permit does not mean that investors must live in the country. Therefore, investors can invest in a property that still earns them income as they continue living in their home country. Paying taxes earned from their European properties in the country they are earned increases their chances of gaining citizenship when the residency period is over. It is easy to get a professional property manager for your property.
Price increases in the real estate sector across Europe
Another emerging trend in Europe’s real estate sector is the rise and rise in the price of real estate. As a result of more and more wealthy and high net worth individuals competing to buy real estate that will qualify them to apply for the golden visa program.
As the demand for the real estate investment programs surges, so does the demand for the required real estate. In Portugal, to qualify for this program, one needs to acquire property worth at least €500,000. Consequently, there will be many developers building apartments and luxury homes for high net worth individuals that fit these price levels.
This means that to satisfy the demand for investment properties, developers may need to acquire more land. Higher demand leads to higher prices for both land-built property. Ordinary buyers are priced out of the market that only attracts high net worth foreigners seeking the European passport.
The increased price of properties affects the availability of the property. There will be fewer properties in the market and only those with the capability to buy expensive property will. A recent survey shows that it is already difficult for ordinary real estate investors in Europe to find an affordable and suitable property to buy.
Rising construction costs around European countries and the demand for golden visas in the countries that offer them have significantly impacted the price of real estate. As this happens, investors could likely expect lower returns as the supply of property diminishes.
Increasing demand for high-end real estate
Investors applying to the golden visa program, are not limited to a particular type of property investment that they should make. The only limits provided are the prices of property one needs to invest in to qualify for a golden visa.
Therefore, as an investor, you have a choice of the type of investment property you want for the investment amount stipulated. For this reason, you will find that many foreign investors have made luxury homes their investment of choice.
With this becoming a trend, and a ready market of buyers, developers have increased the supply of luxury properties. In cities such as Lisbon, which was chosen as the most attractive real estate investment destination in Europe in 2019, you can easily find top price luxury apartments.
Investors are also increasingly buying into luxury hotel properties. This is a good investment for many as it also increases their property portfolio. It is an income-earning asset that they can hold even for much longer than the period of their residency.
Over the last decade, luxury apartments have had more buyers than villas and mansions. As the economy around Europe has risen, there has been an increase in the number of high net worth individuals. This group of individuals has to lead to the demand for luxury real estate. With the increase of other high net worth individuals seeking the golden visa, the demand for luxury properties has skyrocketed around Europe. This has also led to an increase in the price of real estate.
More investment in suburban areas
As demand for the golden visa surges, more and more real estate investors are looking for city properties. This has led to the increase of price to suitable properties within the cities causing a problem of availability.
As this has persisted, governments have had a change of tact in the management of the property investment programs. For example, in Portugal, where golden visa applicants need to invest €500,000 to qualify, other categories of investment properties have been introduced.
For an investment of €350,000 in the outskirts of the city in government-stipulated areas, you will qualify for the golden visa program. This plan seeks to boost the growth of other areas beyond the city. The Portuguese government encourages investors to buy old and run-down properties that they can spruce up as an investment. Since the introduction of this category in the Portugal golden visa, many more applicants are choosing this category over the more expensive one.
Around Europe, real estate investors and professionals share the same sentiment. That with rising prices in the city, it is time to leave and invest in suburban areas. These areas are looked at more favorably from an investment perspective in terms of potential long-term returns. In suburban areas, the costs of buildings are not as high as in the city. As such, the cost of acquisition is also much lower.
As the Covid-19 pandemic continues to ravage the world, more and more people are seeking to leave the city for suburban areas. Investors in these areas will thus enjoy higher than expected returns as demand surges.
Access to funds for real estate developers
Investment in European real estate is also getting easier as the region gets more and more investors and funds who provide capital for real estate investment. In addition to the foreigners investing in property for citizenship or residency, there are existing institutional funds investing in real estate.
They also attract a large number of foreign investors who are interested in the European real estate market. Both the European and foreign investors are optimistic about the yields of European real estate markets.
With more transparency in the governance of investment funds, it is easier for foreign institutional real estate investors to partner with local investors. Further, with low-interest rates and stable securities markets with the minimum return, investors are looking to real estate for much better returns.
With banks reluctant to fund real estate over the last couple of years in Europe, these investment funds have been a welcome replacement. European participation in the funds is much lower with most funds coming from foreign countries, especially Asia and America.
With the ease of availability of funds for viable projects, there are many real estate projects ongoing in many European cities. Unlike several years before, when the financial crisis hit, many are hopeful that ongoing projects will not stall and leave shells of unfinished buildings in the city.
As more and more money is made available for real estate developers, there will be more property available to supply the surging demand for real estate investment programs.
Tax incentives for investors
Tax incentives for foreign investors in the golden visa programs have led to high demand for real estate in European countries. As residents in the European countries providing residency, investors have lower tax rates for their income. Income earned from abroad for those who live in the countries of residence is not taxed while income earned in the European countries, they live in is taxed at lower rates for a given period.
A change in the type and purpose of properties
As the popularity of the real estate investment programs grows, a corresponding change in the type and use of real estate is seen and its effects are felt. Due to the price of investment required, many investors are opting for different types of property. Investors are investing in hotels more than residential or office buildings.
Properties that were previously used as residential buildings have also been converted to short-stay residences. This has led to an increase in the amounts of rent charged. As such, many residents have moved out in search of cheaper housing.
As investors also make their investments in commercial buildings, they are opting for large office space and warehouses. Retail space is converted to office space or short stay apartment as more and more shopping in Europe is now done online.
There are now more hotels built in European cities than residential properties. There are also more offices and warehouses than retail space available. All these changes are both positive and negative effects in the real estate market.
These changes result in lower availability of residential housing with owners preferring short stays to rent out their houses. It also results in higher asking rates for rent.
Environmental factors
As the need for better care of the environment rises every day, real estate investors and developers are feeling the increasing need to also take better care of the environment they work in. For a long time now, environmental factors have not been taken into consideration when approving and carrying out real estate projects.
More and more real estate investors are now considering the quality of the environment that they will enjoy while living in the property. Water and air quality are important aspects to consider when buying and when constructing the property. Property in areas with better water and air quality now have a higher demand and thus available at premium prices.
Most real estate investors are also seeking to have sustainable projects. This means that their developments are unlikely to interfere with the surrounding environment. Further, sustainable real estate development also looks at the carbon footprint of the property. Many developers are thus developing green properties that have little emissions and effects on the environment. Properties with efficient energy use and minimal waste of resources such as water.
With the world now racing to slow down the effects of environmental degradation, property investors are also increasingly looking for environmentally friendly properties.
Rent freeze in major cities
As the demand for the golden visa programs rises, rental prices are increasing exponentially as investors seek good returns for their investments. As such residents are finding it difficult to afford available housing. Recently, Berlin instituted a rent freeze for properties around the city to ensure that people can afford to live close to their workplaces. This will lower the rate of investment in the city as more and more investors seek for areas without rent controls.
Conclusion
The real estate sector has been affected by the popularity of real estate investment programs. This program has led to an increase in property prices and rents in European cities. This has led to locals being priced out and other countries setting up rent controls. Environmental sustainability has also become a significant factor affecting real estate sales and development.
European countries have recovered from the last financial crisis impressively over the last decade. Many of them are almost back to pre-crisis economic growth rates. This means that there is more money in their economies and with that higher demand for products in their economy including real estate.
Real estate, a once depressed sector in many European countries is now one of the leading and most profitable. This is as a result of the resulting high demand from foreign investors participating in the real estate investment for citizenship programs.
The high demand has led to significant improvements in these sectors amid other changes. Here are some of the emerging trends in real estate in Europe.
Increasing demand from foreign investors
Foreign investors have shown significant interest in Europe’s real estate market. This has been driven mostly by the rising demand for golden visa programs that are predicated on real estate investment for residency and eventual citizenship in the European countries.
High net worth individuals from countries in the Middle East, China, Brazil, South Africa, and other emerging countries have applied to the program in droves. Most of these individuals are not just looking to move to Europe – they are expanding their investments and this route comes with a European residency benefit.
This residency permit allows you as an investor to live and work in any EU country and enjoy the benefits of EU citizenship. Also, the value of the real estate investments is rising as more and more citizenship seeking investors flock into the country looking to buy a property.
The golden visa program requires that those who gain residency through it own their holdings for the length of the residency. It varies in different countries, but five years is the minimum. With a growing economy, when the residency period lapses, the value of the property will have risen.
Further, the residency permit does not mean that investors must live in the country. Therefore, investors can invest in a property that still earns them income as they continue living in their home country. Paying taxes earned from their European properties in the country they are earned increases their chances of gaining citizenship when the residency period is over. It is easy to get a professional property manager for your property.
Price increases in the real estate sector across Europe
Another emerging trend in Europe’s real estate sector is the rise and rise in the price of real estate. As a result of more and more wealthy and high net worth individuals competing to buy real estate that will qualify them to apply for the golden visa program.
As the demand for the real estate investment programs surges, so does the demand for the required real estate. In Portugal, to qualify for this program, one needs to acquire property worth at least €500,000. Consequently, there will be many developers building apartments and luxury homes for high net worth individuals that fit these price levels.
This means that to satisfy the demand for investment properties, developers may need to acquire more land. Higher demand leads to higher prices for both land-built property. Ordinary buyers are priced out of the market that only attracts high net worth foreigners seeking the European passport.
The increased price of properties affects the availability of the property. There will be fewer properties in the market and only those with the capability to buy expensive property will. A recent survey shows that it is already difficult for ordinary real estate investors in Europe to find an affordable and suitable property to buy.
Rising construction costs around European countries and the demand for golden visas in the countries that offer them have significantly impacted the price of real estate. As this happens, investors could likely expect lower returns as the supply of property diminishes.
Increasing demand for high-end real estate
Investors applying to the golden visa program, are not limited to a particular type of property investment that they should make. The only limits provided are the prices of property one needs to invest in to qualify for a golden visa.
Therefore, as an investor, you have a choice of the type of investment property you want for the investment amount stipulated. For this reason, you will find that many foreign investors have made luxury homes their investment of choice.
With this becoming a trend, and a ready market of buyers, developers have increased the supply of luxury properties. In cities such as Lisbon, which was chosen as the most attractive real estate investment destination in Europe in 2019, you can easily find top price luxury apartments.
Investors are also increasingly buying into luxury hotel properties. This is a good investment for many as it also increases their property portfolio. It is an income-earning asset that they can hold even for much longer than the period of their residency.
Over the last decade, luxury apartments have had more buyers than villas and mansions. As the economy around Europe has risen, there has been an increase in the number of high net worth individuals. This group of individuals has to lead to the demand for luxury real estate. With the increase of other high net worth individuals seeking the golden visa, the demand for luxury properties has skyrocketed around Europe. This has also led to an increase in the price of real estate.
More investment in suburban areas
As demand for the golden visa surges, more and more real estate investors are looking for city properties. This has led to the increase of price to suitable properties within the cities causing a problem of availability.
As this has persisted, governments have had a change of tact in the management of the property investment programs. For example, in Portugal, where golden visa applicants need to invest €500,000 to qualify, other categories of investment properties have been introduced.
For an investment of €350,000 in the outskirts of the city in government-stipulated areas, you will qualify for the golden visa program. This plan seeks to boost the growth of other areas beyond the city. The Portuguese government encourages investors to buy old and run-down properties that they can spruce up as an investment. Since the introduction of this category in the Portugal golden visa, many more applicants are choosing this category over the more expensive one.
Around Europe, real estate investors and professionals share the same sentiment. That with rising prices in the city, it is time to leave and invest in suburban areas. These areas are looked at more favorably from an investment perspective in terms of potential long-term returns. In suburban areas, the costs of buildings are not as high as in the city. As such, the cost of acquisition is also much lower.
As the Covid-19 pandemic continues to ravage the world, more and more people are seeking to leave the city for suburban areas. Investors in these areas will thus enjoy higher than expected returns as demand surges.
Access to funds for real estate developers
Investment in European real estate is also getting easier as the region gets more and more investors and funds who provide capital for real estate investment. In addition to the foreigners investing in property for citizenship or residency, there are existing institutional funds investing in real estate.
They also attract a large number of foreign investors who are interested in the European real estate market. Both the European and foreign investors are optimistic about the yields of European real estate markets.
With more transparency in the governance of investment funds, it is easier for foreign institutional real estate investors to partner with local investors. Further, with low-interest rates and stable securities markets with the minimum return, investors are looking to real estate for much better returns.
With banks reluctant to fund real estate over the last couple of years in Europe, these investment funds have been a welcome replacement. European participation in the funds is much lower with most funds coming from foreign countries, especially Asia and America.
With the ease of availability of funds for viable projects, there are many real estate projects ongoing in many European cities. Unlike several years before, when the financial crisis hit, many are hopeful that ongoing projects will not stall and leave shells of unfinished buildings in the city.
As more and more money is made available for real estate developers, there will be more property available to supply the surging demand for real estate investment programs.
Tax incentives for investors
Tax incentives for foreign investors in the golden visa programs have led to high demand for real estate in European countries. As residents in the European countries providing residency, investors have lower tax rates for their income. Income earned from abroad for those who live in the countries of residence is not taxed while income earned in the European countries, they live in is taxed at lower rates for a given period.
A change in the type and purpose of properties
As the popularity of the real estate investment programs grows, a corresponding change in the type and use of real estate is seen and its effects are felt. Due to the price of investment required, many investors are opting for different types of property. Investors are investing in hotels more than residential or office buildings.
Properties that were previously used as residential buildings have also been converted to short-stay residences. This has led to an increase in the amounts of rent charged. As such, many residents have moved out in search of cheaper housing.
As investors also make their investments in commercial buildings, they are opting for large office space and warehouses. Retail space is converted to office space or short stay apartment as more and more shopping in Europe is now done online.
There are now more hotels built in European cities than residential properties. There are also more offices and warehouses than retail space available. All these changes are both positive and negative effects in the real estate market.
These changes result in lower availability of residential housing with owners preferring short stays to rent out their houses. It also results in higher asking rates for rent.
Environmental factors
As the need for better care of the environment rises every day, real estate investors and developers are feeling the increasing need to also take better care of the environment they work in. For a long time now, environmental factors have not been taken into consideration when approving and carrying out real estate projects.
More and more real estate investors are now considering the quality of the environment that they will enjoy while living in the property. Water and air quality are important aspects to consider when buying and when constructing the property. Property in areas with better water and air quality now have a higher demand and thus available at premium prices.
Most real estate investors are also seeking to have sustainable projects. This means that their developments are unlikely to interfere with the surrounding environment. Further, sustainable real estate development also looks at the carbon footprint of the property. Many developers are thus developing green properties that have little emissions and effects on the environment. Properties with efficient energy use and minimal waste of resources such as water.
With the world now racing to slow down the effects of environmental degradation, property investors are also increasingly looking for environmentally friendly properties.
Rent freeze in major cities
As the demand for the golden visa programs rises, rental prices are increasing exponentially as investors seek good returns for their investments. As such residents are finding it difficult to afford available housing. Recently, Berlin instituted a rent freeze for properties around the city to ensure that people can afford to live close to their workplaces. This will lower the rate of investment in the city as more and more investors seek for areas without rent controls.
Conclusion
The real estate sector has been affected by the popularity of real estate investment programs. This program has led to an increase in property prices and rents in European cities. This has led to locals being priced out and other countries setting up rent controls. Environmental sustainability has also become a significant factor affecting real estate sales and development.
