5 European Cities Popular with International Property Investors
How the pandemic has been driving up the property markets of some European cities more than the other; here's why London, Lisbon, Berlin, Paris and Barcelona are hot on the radar
The pandemic has altered many things in our lives, and it certainly has changed the investment strategies of property buyers—what with where we spend time, where we live and where we work all merging into one location.
The European property markets, as with most others, which have for the most part of 2020 been fuelled by domestic interest due to lockdowns, are now attracting international interest for the same reasons. With the increased levels of flexibility afforded by the new normal, the concept of home is being taken over by the desire to have a quality way of life. These have been the biggest drivers of the international markets.
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“Now more than ever, buyers are looking for liquid assets, but are also really engaging with finding a property that matches modern needs—the quality, location, and the view. Buyers want to ensure their investment is more fluid and that their asset is highly desirable, making it very easy to rent out or sell,” says Oliver Banks, senior negotiator of international residential developments at real estate consultancy firm Knight Frank.
Here are the key European cities that have been topping the list of international investors.
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The vibrant European city of Berlin is famed for its lifestyle pedigree—art, culture, music, and nightlife—attracting property buyers from around Germany as well as Europe.
Among other cities in Europe, along with Amsterdam, Berlin is considered a very livable city with good tax schemes adding to the popularity, says Sophie Chick, Director of world research at Savills. “A lot of it also comes down to supply, while there are other drivers going on, such as increased demand for space. In a place like Berlin where not a lot of new developments have happened, there are constraints in terms of supply and there is a lot of demand unsurprisingly,” she says. This also means that property investors can resell their properties within a short period of time.
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Despite the growing demand and the veritable short supply of housing options, property prices in Berlin are relatively more affordable, in a country with a very stable economy— which is another draw, says Oliver Banks, senior negotiator, International Residential Developments at real estate consultancy firm, Knight Frank.
“Capital growth has been strong and will continue to be so as it catches up with other mature markets in Germany such as Frankfurt, Munich and Hamburg,” he says. “Berlin is a major hub for tech start-ups, with a young talented workforce relocating there for this as well as the energetic lifestyle Berlin provides. Having said that, it is also drawing interest from major corporate companies such as Tesla and Amazon.”
Besides these, the city gives its residents access to one of the best healthcare systems in the world, a top criterion in the pandemic-invoked new normal. “This is a common talking point among foreign purchasers currently,” says Banks.
Paris has long been universally recognised as one of the most beautiful cities as well as a centre of culture and heritage. “Fashion, cuisine, art and cinema are tightly woven into the historical fabric of Paris,” says Banks. “This also means that the opportunity for new housing supply is very limited and continues to underpin pricing.”
To that end, the 10th and 11th arrondissements are most sought-after because of their affordable prices, when compared with central Paris, while also being able to provide a vibrant local scene, according to Banks. “Areas on the border with the 19th arrondissement in the northern part of the 11th have garnered increased interest recently with investors.”
“We have been seeing this trend of a net migration into big cities and away from them—as people showed a preference to smaller European cities for their livability quotient—on the lead up to the pandemic, and the pandemic may well accelerate that,” says Chick.
That said, these global cities have shown incredible resilience, and they do adapt to different needs—such as Paris’ 15-minute city urban model, which is focused on improving quality of life by localising resident’s needs within a 15-minute radius—accessible by foot or bike,” she explains.
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With the Rugby World Cup and the Olympics due in Paris in 2023 and 2024, respectively, the city “has caught the attention of investors and has also been the main driver behind one of the largest infrastructure overhauls in Europe, such as the Grand Paris Express, which is adding 200 km of the new train track and 68 new stations”, adds Banks.
The pandemic has seen a surge of second home buys, although investor interest in places of natural beauty such as Lisbon has been there even before the pandemic. “Previously, the purpose of a second home was to have a place by the sea or somewhere rural, where they could go spend time on a holiday for about two weeks, but now with the onset of Zoom and other videoconferencing facilities, people are thinking more along the lines of a second home that they can also work from,” says Chick.
Lisbon, with its warm climate, postcard-perfect locales, and discreet bustle ticks quite a few boxes in that respect for overseas investors, including A-listers. Quinta de Lago in the South has been popular for the same reason and has been attracting some trophy home buys, adds Chick.
When it comes to Lisbon, there is something incredibly authentic and unpretentious about the culture, says Banks. “This is a city where simplicity reigns, with some of the most unassuming but top-notch seafood restaurants in Europe. An average apartment in Lisbon can cost between €3,600 to €8,400 per square metre, depending on the type of real estate, which is much better value than many of its European counterparts,” explains Banks.
Portugal’s real-estate based Golden Visa Program—which helps international buyers and their dependents obtain residency with a minimum investment of €350,000 in real estate in Portugal—has also helped in terms of international interest, as more and more people are waking up to what Portugal has to offer, says Chick.
The Spanish city has all that property buyers, local and international, are getting increasingly concerned about such as lifestyle, accessibility, education and most importantly, sustainable initiatives, says Banks. The city has seen adding in walkways and cycle paths to cater to these growing needs.
“The other trend that is key to track is the quality of stock available in each of these markets. For years, this has been lagging behind the likes of London, New York, Singapore, and Hong Kong. I am pleased to report that the gap is being closed in several European markets but particularly in Barcelona, where we are seeing a number of well-built, well-finished product that also provides the quality of amenities that international buyers and investors have come to expect,” he adds.
Despite the surge of interest, property prices in the city are still low compared to Paris among other European cities, inviting investors from around Spain as well as the Middle East and the United States.
At a time when property investments are even more hinged on a country’s economic and financial stability, London continues to attract overseas investors. The Stamp Duty Land Tax holiday that was introduced in 2020 across property buys in England and Northern Ireland also hedged international interest.
“Buyers from Asia-Pacific accounted for 2.6 per cent of buys in London’s prime secondhand home market, between January 2020 and April 2021. The number decreased slightly to 1.9 per cent, but that was because properties in parts of South West London such as Northcote Road and Battersea were gaining in popularity,” says Chick.
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Although space is a premium, London has a lot of parks which people are getting more and more appreciative of. To reap the benefits of a city lifestyle, the trend is moving towards people at the top end of the market buying smaller properties in London and buying a larger one in the countryside, says Chick.
“As things are starting to open up gradually, I think we will a shift from the younger demographic wanting to be in the centre of things and not wanting to work from home. You can definitely see that different types of living appealing to different generations,” she adds.