Price pain in Spain drives Spaniards to look for investment property abroad
Spain’s real estate boom has made the country the darling of property investors from across Europe who, since the late 1990s, have sunk billions into houses and apartments in cities and coastal areas in order to reap the benefits of double-digit price rises. But with Spanish property values now sky high and with signs emerging that the trend is cooling, other European countries are starting to look increasingly attractive for both big institutional buyers and small investors. Having benefited from the boom in Spain, many Spanish investors are now looking for somewhere else to park their money while their home market cools.
Analysts agree that cities such as London and Paris – despite sharp price rises in recent years – continue to offer a safe bet for the future, especially once their strong rental markets are taken into account.
€6,000 a square meter in central Paris
A city center apartment in Paris sells for around 6,000 euros a square meter, the same price as one in Madrid, but in the French capital investors can expect to make a return of 4 percent on their money each year through renting, compared to 3 percent or less in the Spanish city. In France, that return is set to grow even faster over the coming years.
In London, meanwhile, many analysts, as in Spain, are talking about a “stabilization” of prices as the property boom cools, but even in that context property owners in the British capital are expecting to see house values go up by 8 percent this year, compared to 4 percent in the rest of England and Wales.
“Paris and London will always be two major markets,” notes Etienne Brocas, a representative of Banif Inmobiliaria, the real estate arm of the Portuguese investment bank.
But if the French and British capitals offer a relative safe haven for capital and the chance to seek moderate returns through rental properties, Brocas and other analysts are eyeing other destinations for investors looking to make even more sizeable returns over the coming years
New safe investment havens - Japan, Germany and Portugal
Though the boom in real estate prices that took hold in Spain since the late 1990s has been part of a broader global phenomenon among developed nations, not every country got caught in the surge. In particular, three of the ones that missed out are now being favored by analysts and market watchers: Japan, Germany and Portugal.
“The housing boom has been global, although it didn’t occur in those three countries and those are the ones that now have greatest potential,” says Miguel Gonzalez, an economic analyst specializing in the real estate sector.
For European buyers, Germany and Portugal especially are attractive options.
While the value of virtually every other European’s house has rocketed, Germans have seen their house prices slump 30 percent between 1980 and 2006. In Portugal, house prices have fallen 5 percent in the last five years, according to Gonzalez. “In both those markets house prices are on track to rise by more than 10 percent from 2008 and beyond,” he predicts.
In Berlin, for example, a comfortable, well-situated apartment in the city can be bought for between 210,000 and 240,000 euros and should offer a rental return of between 5 and 6 percent.
Lisbon, a third cheaper than Madrid
In Lisbon, on the other hand, house prices are a third lower than in Madrid and rental returns are greater than in most Spanish cities. “Returns from renting can be between 4.5 percent and 6.5 percent of the amount invested, compared to 2 percent in the case of Barcelona,” a Spanish consultant notes.
Portugal’s ongoing economic reforms should get the country’s economy back on track after years of stagnation, while recent changes to make the rules governing the rental market more flexible should further encourage investment in the Portuguese real estate sector.
Analysts note that the old centers of Coimbra, Porto and Lisbon, which are likely to undergo extensive facelifts over the coming years, are particularly hot locations for people looking to buy to rent, while nearby rural and coastal areas are also eliciting interest.