Real Estate In The EuroZone - Is It Time To Invest?

drinkingteddy's picture

property passport
There are seriously discounted quality properties out there, some of which offer significant potential for capital growth over the next five to seven years.

The recent financial turmoil in some of the countries within the eurozone has resulted in a detrimental, knock on effect on the value of property prices within some of these markets.

Well-publicised sovereign debt problems in Greece, Portugal and, more recently in Italy, together with global bank instability, has also meant that declining property values are not simply restricted to those countries immediately affected by the crisis. 

In the year ending March 2011, property prices fell in Greece (down by 5.7%) and in Spain (4.6%), whilst other, albeit lesser, falls were also found in Portugal (1.8%) and in Italy (1.4%). 

As the situation in the european property market remains fluid, it's also worth noting that some EU member countries have actually reported an increase in house prices during the same period. 

Property prices in Switzerland and France, for example, made notable gains of 5.1% and 9.1% respectively. The market in France being fuelled by a buoyant market economy, boosted by very low interest rates.

The flip side to a declining market fall of course is that, despite the problems, the property price point is now at a level where some significant investment opportunities are available - especially for those with readily available cash to spend.

In order to invest wisely in the european property market, investors should measure their risk / reward investment opportunity on certain key indicators .

Whether buying for capital gain, rental yield or simply as a 2nd home, the decision of when to buy and where remains the same.

Currency Fluctuations.

If buying from outside of the Eurozone, your local currency to the Euro can fluctuate as much as up to 25% within a matter of weeks. Talking to currency professionals can help you assess the currency futures market which, in turn, could save you thousands of euros on the purchase price of your investment.

Cash advantage

Eurozone interest rates remain low, but many countries continue to face mortgage constraints. Buying with cash can offer you a significant negotiating advantage.

Changing legislation

It pays to monitor legal changes -such as the recent French government move, now subject to a U-turn, to apply capital gains tax to second homes. Or the Spanish government’s proposed new asset-based, real estate tax. You can keep right up to date by talking to professionals and subscribing to online property news feeds. Always take legal advice as to how changes in the law may affect your real estate investment strategy.

Significant discounts

Many high-end eurozone properties are being heavily discounted, sometimes by as much as up to 30 per cent from their original asking price. This is because owners can still make a profit on the sale, even if there have been some favourable movements in currency exchange rates. Most of the european wide property websites have a good range of discounted properties, and these should be your starting point. In Spain, for example, there are reports of experienced property investors buying multiple units at up to 50 per cent off 2007 prices. It is worth pointing out however that, despite the fall in the market, many high-end properties across the eurozone have continued to  maintain their value over recent years despite properties in their immediate vicinity falling in value.

Think outside the box

Of course, we all know the hot spots - Côte d’Azur, Marbella, Malaga Province, the Balearics and the Algarve – but have you thought of investing in somewhere like the Canary Islands? These islands have excellent air links, all-year-round sunshine, a wide variety of spectacular landscapes, golf courses and a range of fabulous properties across all price ranges.

Buying a property in an area that is not currently en-vogue may not mean that it doesn't have value. Many forgotten destinations, such as the canaries, offer great value to investors especially when they're not the latest in-destination. 

Check the tourism figures

If you’re looking for rental income from your investment, you need to research the tourist market. Is the country, or region, served by a good number of airlines? Are tourist numbers moving in the right direction? Despite the financial uncertainty, tourist numbers for Spain are actually up 2.9 percent in the first quarter of 2011. And June 2011 saw Portugal’s tourist spend up 10.3 percent over 2010 figures – the best ever June figures. 

Positive indications

Recent reports have indicated that, barring major setbacks, the final months of 2011 could see current, reduced real estate sales replaced by more confident activity and an increase in sales generally

Take a professional approach

When it comes to investing in a eurozone property, the watchwords are: understand the financial situation and the variations across the continent, check currency fluctuations and trends, visit eurozone property websites to identify the heavily discounted properties and take as much professional advice as possible. 

The time is right

This is a time of opportunity. There are seriously discounted quality properties out there, some of which offer significant potential for capital growth over the next five to seven years. 

In the meantime you can always holiday or long term let your property to provide month on month rental income. This will contribute to your return on investment (ROI) as the property's capital increases.

Move Quickly

Finally, as in any investment situation, always be ready to move quickly and decisively when the opportunity arises.

Jason Chick
Managing Director



Gary Wiggin's picture

USA is on sale and is a great buy as well! We have properties that cash flow double digit returns today! Speculation of appreciation not included. We handle everything. You do nothing but cash a check every month.

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