Commercial Real Estate News from Overseas
Six Cities In Europe With Hot Real Estate Investment Prospects
In the wake of the global financial crisis, many cities in Europe have been placed into limbo. For the last five years those cities which were seen as safe markets have been preferred to those with growth potential. While there is still significant pessimism among many investors about Europe‚Äôs long term growth prospects, some cities appear to be rebounding from the recent global financial crisis. In this guide we will look at six cities in Europe which offer the best investment potential for commercial real estate investors.¬†
Istanbul was rated as the number one market for real estate investment in 2012 according to a report produced by Price Waterhouse Coopers and the Urban Land Institute. This is backed by figures from Gyoder which show that since 2010 property prices have risen by 29.3% in Istanbul.
The rise in property prices in the capital are attributed to the cities youthful population and booming local economy. Retail investment is a particularly bright spot in the Istanbul commercial real estate market. Consumers are spending more, and there are many international company‚Äôs looking to enter the Turkish market.¬†
Currently it is possible to get rental yields of around 8% in the city. While the market has risen strongly in recent years there is still plenty of room for growth. Property prices in Istanbul are still significantly lower compared to other cities in Europe.
Berlin is considered to be the most attractive market for residential property investment. This is largely due to a stable local economy and good demand for rental properties. In the past the city has been considered a Mecca for artists and other creatives due to relatively cheap rents, a thriving arts scene and hip neighbourhoods.¬†
However in the last couple of years rents have began to skyrocket. Over the past decade residential property prices have doubled. And over the last three years property prices have increased by as much as 50%. One of the main reasons for the rise in property prices in Berlin has been due to foreign investment. Spanish, Greek and other wealthy European investors have been looking for a safe place to invest their money. Germany is viewed as a safe market and prices for property in Berlin are much lower compared to other cities.¬†
While property prices in Berlin have increased the city is still considered cheap by international standards and offers good investment possibilities. Demand is also expected to remain steady due to the relatively ease of obtaining the mortgage and low interest rates.¬†
Warsaw has proved more popular with international investors than local ones but still offers interesting prospects. Warsaw is viewed as the main financial center for Eastern Europe. This is expected to boost demand and prices for office space in the city.¬†
Warsaw is another city with a healthy and growing consumer market. This means that many international retailers looking to set up shop in Warsaw. Currently there is very low vacancy rates for retail property in Warsaw and inventory figures are low.
Stockholm has benefited by being viewed as a relative safe haven for real estate investment. Sweden has a growing economy which is being driven by exports and a solid public sector. Between 2011 and 2013 property prices in Sweden declined, but in the first quarter of 2013 house prices grew by 3.05% according to figures released by Statistics Sweden. In greater Stockholm property prices increased by 2.7%.¬†
Rising property prices are in part due to low supply. Like the UK and the Netherlands, Sweden suffers from a relatively low building rate. This was compounded by free market reforms in the 1990‚Äôs which meant there was less construction of dwellings for social housing. In 2010 there were only 19,500 housing completions which are much lower than the number in the 1990s.¬†
Demand for property will also be supported by low interest rates. Sweden growth was slower in 2012 than in previous year due to a weaker export market in Europe and a strong Kroner. In response the Riksbank has cut interest rates to a low of 1% in order to promote economic growth. Expectations are for prolonged economic growth in 2013 and 2014.
Ireland was one of the countries hardest hit by the recent global financial crisis. Due to massive over building and sky rocketing prices, Ireland house prices had a long way to fall. However after years of stagnation it seems that Irelands property prices may be on the rise once again.¬†
Prices across the country as a whole are expected to increase by up to 7% nationally in 2013. In Dublin this figure is expected to be closer to 10%. Dublin also saw an 8% increase in 2012 of housing market transactions to 5,642 according to figures released by the Irish Banking Federation.
Spain is another country that is still struggling to recover from the global financial crisis. However parts of the country have been affected less than others. Madrid did not suffer the worst of the excesses of the real estate boom and so offers promising potential in the case of an upturn. Available housing inventory is not as significant as in other parts of Spain.¬†
Certain areas of Madrid are always in demand including Salamanca, Retiro and Chamberi. According to local property finders the districts of Tetuan and Usera also offer good prospects. According to the website Pisos the most in demand apartments are approximately 90 sqm and between 120,000 and 135,000 euros.
In general the safest cities for commercial property investment are generally found in western and northern Europe. London has been a standout performer in real estate returns over the last few years, but many consider it to be over valued and possibly even in a bubble. Cities with the best potential appear to be those with rapidly growing economies and a strong local consumer base. Warsaw and Istanbul both offer good growth prospects for retail property investment.¬†
Cities which were hardest hit by the global financial crisis such as Dublin also have rebounded strongly over the previous year. Overall the market is still in a fragile condition and there are serious questions over whether banks will begin lending again. Despite these concerns, select cities in Europe offer the best investment potential seen since the global financial crisis.