Investments in real estate abroad are attractive to Russian investors for the same reason that a diploma from an international university is preferred during the start of a professional career – they open a wide horizon of opportunities.
The decision to purchase a residential property abroad can serve different purposes during the life-cycle of the investment; first, from the apartment you can receive income by renting it, then use it as a temporary place of residence for a child who enters a European university, thus substantially reducing the costs for the entire period of study, and later, if you want to live there yourself, having obtained a residence permit or permanent residence.
Due to the fluctuating economic and political climate, it is impossible to predict the long term outcome of any real estate investment, however it is possible to identify geographical trends which may lead to a sound and long-term profitable investment.
According to PwC annual Emerging Trends Europe Report, Germany accounts for four of the top six leading cities for overall investment and development prospects in 2018, with Berlin once again at Number 1. Though values in the German capital have rocketed over the past year, industry leaders believe the growth is sustainable, supported by a rising population and a vibrant technology sector.
Germany, namely Berlin and Munich over the past 10 years attracted a huge investor interest, is still seen as a comfortable investment as in these cities property prices are constantly rising. For example, in Munich there is an increase in prices by an average of 3-6% per year. In Berlin, the same price for second homes over the past year increased depending on the area, and so far nothing indicates that the situation in the coming years will change. In 2018, these cities will join Frankfurt and Hamburg, which is not surprising: the latter will account for the largest amount of construction of the country. Prestigious international companies also play into the hands of investors, who are increasingly choosing Hamburg to open representative offices.
If you consider the European real estate market as a satisfying Christmas pie, then one of the sweetest pieces at the moment can rightly be called the Portuguese direction. When buying a property in Lisbon from 500 000 euros you get the opportunity to issue a residence permit, and then, subject to the minimum requirements, and permanent residence.
With the Portuguese Government encouraging foreign investment and while the demand for rent in Lisbon is still rather high, investment in Lisbon and Portugal in general is seen as a favorable location.
As for other European cities, most suitable for the purchase of investment properties, it is impossible not to list Barcelona, Prague, Vienna and London.
Speaking exclusively about recreational and tourist destinations, in addition to traditional Italy, you should look to the south and east – towards Greece. Prices here are at an extremely low level. If the country manages to implement economic reforms competently, in the near future, not a rapid but steady rise in prices will begin. In addition, with relatively low investment amounts (from 250,000 euros) in Greece, you can obtain a residence permit. This fact is a huge advantage for investors not from the European Union.
Among the markets with a small entry threshold is the Spanish real estate market, in particular Barcelona. Despite the political situation, the tourist flow is growing rapidly without seasonal connection, which increases the demand for real estate for permanent and temporary residence.
Russian investors are increasingly attracted by the UK real estate market. Against the backdrop of a large number of profitable proposals, the loyalty of owners and builders creates a very friendly atmosphere for initiating an investment dialogue and contributes to the external inflow of capital. The only caveat is the perceived uncertainty of Brexit.
The UK real estate market has also had an appetite linked to the British education system; investing in student apartments. This segment of the market is more conservative, less subject to fashion and political risks, as well as seasonal fluctuations.
Students who come to receive higher education in Europe, most often rent accommodation for the entire period of study (from 2 to 6 years). The UK holds the brand of the most prestigious educational center in Europe, more than 500 000 foreign students come here every year. However, according to the rules applied by most universities, only first-year students can take a place in a university dormitory, undergraduates are faced with the need to rent housing outside of university dormitories.
In the context of this market, even the recent reform of the financing system, which has affected local universities, is playing into the hands of future investors, the result of which has been a reduction in non-core expenditures. As a result, despite the opening of new faculties and business schools, universities are not in a position to provide students with new housing.
Deficiency of housing for students in the areas of the university forms a high demand for the rental of apartments. However, according to HESA (Higher Education Statistics Agency) data for 2016 only 25% of the total student accommodation is covered by Private Sector Hall (private student apartments). According to mypropertyguide.co.uk, these apartments do not differ much in price compared to standard dormitory apartments, but they far outperform them in terms of comfort and allow for independence and personal space. (On average, it is £176 and £118 per studio and room, respectively, against £86 per room in the hostel).
The most attractive cities for university accommodation are Liverpool, Leeds Manchester, Newcastle Sheffield. Compared to London, the return on investment in these cities is higher, and the required budget is lower.
In Liverpool there are just three universities: University of Liverpool, John Moores University, Liverpool Hope University. This city, in particular, is considered the most popular among students from China. Annually about 36,000 foreign and out-of-town students in Liverpool need accommodation for the duration of their studies, and the existing housing stock does not cover all requests, and by 2020 the number of students is expected to increase by 10%. Also promising is the neighboring Chester with Liverpool, investments in the city’s economy amount to £1 billion a year.
The budget of the entrance to such investments is not the highest – from £50,000, guaranteed yield – from 9%, minus expenses for the services of the management company. In the UK, less than £11,000 a year is not taxed, which allows investors to maintain a high level of net profit.
All these factors make the student housing market a key component of a balanced investment package.
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