In recent years, investors have been bullish about the real estate market in Europe., with the United Kingdom, especially cities like Birmingham and London, witnessing a rising number of investors. Are you looking to purchase property in Europe? Keep reading this article to find out whether that is a good investment or not.
Why Investors are Flocking to Europe
A few years ago, many thought Europe was ending. Conversely, several European cities have been experiencing massive economic growth recently. Moreover, property prices are on the rise, and that explains why investors are flocking to the European real estate market. However, the rising property prices favor only wealthy investors, while those with less investment funds find property in Europe expensive.
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The Reality of Property Investments in Europe
Although expensive, properties in Europe offer reasonable returns. However, the demand for houses and apartments has pushed rental prices up, causing discontent among tenants in major cities like Amsterdam and Berlin.
Should Investors Worry About Low Inflation When Acquiring Property in Europe?
As of November 2023, the inflation rate in most European countries stands at 4.3% and isn’t expected to increase substantially over the coming years. Many investors ask whether the inflation rate matters. The short answer is yes. That’s because in case inflation surges, the value of their investments will also increase.
Interest Rates in Europe
Since 2022, the European Central Bank has been increasing interest rates to keep inflation low. This has made it expensive for people to finance their property purchases using mortgages. However, those investors who borrowed loans before 2022 at fixed rates are enjoying low borrowing costs as rental prices continue to surge, thus boosting their profits.
Expected Returns From Investing in European Real Estate Market
Returns from real estate investments in major European cities are positive. You can expect to make at least 15% yearly. If your focus is on capital gains, you can consider buying property in recovering markets. While returns are higher, such investments come with considerably high risks.
That said, it is advisable not to overestimate your return expectations, even if the European property market is in high demand.
Best Places in Europe to Invest in Real Estate
Investing in the United Kingdom
Despite Brexit uncertainty, cities such as London, Birmingham, Berkshire, and Manchester have continued to witness massive demand for property. You can expect a rental yield of about 7%.
Investing in France
Most French cities are experiencing economic growth. For example, Lyon and Paris have attracted several international companies that have created job opportunities for residents, pushing the demand for rentals up. You can generate a rental yield of 10%.
Real Estate in Germany
German major cities such as Munich, Frankfurt, Hamburg, and Berlin have been ranked among the top ten places in Europe to invest in property. However, it is worth mentioning that there have been rising cases of expropriation in Germany, with 3,000 properties already taken away from landlords.
Investing Elsewhere in Europe
The abovementioned places are ideal for people who are willing to spend a lot of cash to buy property. But the good thing is that returns are almost guaranteed. However, if you are less well-off but a risk taker, you can consider investing in places where property prices have declined but are in recovery mode. A good example is Sweden. Although the country’s real estate has not been doing well over the past few years, it has so far recorded a 15% surge in property investment this year. Other places to consider include Romania and Czechia.
Factors to Consider Before Purchasing Property in Europe
Here are the things you need to research when planning to acquire property in Europe:
- Local taxes to be paid.
- What happens to your property in case you pass away.
- Check if you are required to pay capital gains.
Final Thoughts
The European real estate market is booming. However, consider all the risks involved before investing, and remember not to overestimate your returns.