Europe: Is It The Best Place to Invest in Property?
Ah, the eclectic culture, stunning landscapes, delectable food- visiting Europe is truly a dream. From afar, investing in Old Continent property seems like a straight shot to real estate success.
But, there is still a wave of uncertainty when it comes to investing in the European market. After a capricious ripple of economic crises, many are reluctant to tap into this territory.
There is a lot of speculation as to whether Europe is still (or ever was) a hot market. Don’t blindly fall into international investing; you need to understand the region. Here’s an overview on whether Europe is the best place to invest in property.
What to Consider When Investing in European Real Estate
Let’s get some of the bad out of the way first. Is there reason to avoid European real estate? What are the key elements you need to consider? From currency risks to high purchase prices, you need to know the current trends. (160)
A low purchase price is essential to maximizing your ROI. Some European markets offer great affordability, while others are a total money pit.
You’ve also got to consider the type of renter you’re looking for. What areas are they visiting? How much are they willing to spend on a weekly/monthly/yearly rental?
For example, if you’re looking for retiree occupants, you should consider external regions of metro Italy or Croatia. These affordable countries offer many outdoor lifestyle options in a more quaint setting.
Also, keep in mind that a cheap investment doesn’t always equate to a good investment. You have to consider a country’s past and present appreciation values to know where you’ll thrive.
Even if you don’t work in the country you’re investing in, you’re going to be accountable for paying taxes. Luckily, as a U.S. citizen, you can receive credits on some of the international real estate taxes you pay.
Let’s use France as an example. Beginning in January of this year, property owners must pay an annual wealth tax. If your property’s net value is greater than 1.3 million euros, you’re liable. This is in addition to France’s sales taxes and maintenance taxes, which runs rather steep.
No matter what country you invest in, you’re going to have the risk of paying high currency exchanges as a borrower. As a rule of thumb, it’s recommended you borrow as much as you can due to inflation.
But, which country do you borrow in- your own or the one you’ll invest in? Depending on your lending situation, the loaner could inundate you with unnecessary charges.
How you plan to pay off your loan affects the type of loan you should look for. If you’re using income earned in your own country, look for a loan provider from your own country. But, if you’re using property earned interest, a foreign lender is the better option.
Owning property in a certain country doesn’t grant you the right to live there. You’ve got to figure out what visa you’ll need to not only live but do business in that region.
This depends on how much you’ll be using the property yourself. Keep in mind most European countries don’t offer visas for the sole purpose of investing.
But, if you plan to rent your property out for most of the year, you might not need a visa. You’re allowed to stay in the EU for 90 days at a time throughout a 6-month period.
The last major consideration we’ll go over is the low-interest rates attached to European mortgages. It’s predicted these rates continue to remain on the lower end, but they will rise.
Once rates spike again, it could be problematic for investors. It’s predicted this will cause a lot of low yield investments.
Still, you’ll want to purchase real estate on a fixed rate, as floating rates are volatile. Income can rise with inflation, but your rate doesn’t have to. (660)
Why Invest in European Real Estate
Now that we’ve focused on some of the concerns, let’s get into the perks of European investing. All factors considered, Europe can be a desirable investment due to its ever-growing popularity.
Secondary cities are just as flourishing as large metropolises. Demand seems to be on a never-ending upswing, complemented by growing urbanization and better infrastructure.
This exponential growth even affects commercial rental properties. We’re seeing more companies flock to Europe, as certain cities are becoming tech hubs.
Brexit posed serious financial threat to not only U.K. but the rest of the E.U. But, one advantage of this decision is the influx of companies moving to new European nations. Renting out of the U.K. proves to be a financial risk. (791)
Major Cities vs. Secondary Cities
Many investors are seeing better success from properties that aren’t located in the city center. The reason for this is these metro properties have already hit their peak ROI. Outskirt cities still have room for growth.
The busy city markets are now producing a lower yield. Look for alternative locations with a strong micro-economy. For example, the coastal town of San Pedro de Alcantara in Spain grows an abundance of local crops.
This indirectly contributes to the town’s overall growth in housing markets. Plus, it’s a beautiful green town with plenty of shops and beach space. Here you can find more info on why investing in this Spanish town is a good investment.
Is Europe the Best Place to Invest in Property?
Is Europe the best place to invest in property? With low interest rates and high demand, you’ll enjoy a good ROI on your European property. That is if you carefully consider the market you’re going into.
Sky Five Properties can help you find your dream real estate venture. Our innovative, forward-thinking team works with the most sought-after properties in Southern Florida, the Bahamas, and the Caribbean. Check out some of our rentals here.