Portal cnbc.com writes that the continent has something for everyone, from good food, rich culture to beautiful scenery – and property buyers are choosing it.
According to new research by international real estate agency Knight Frank, Europe’s prime property market has grown by 5.6 percent over the past year as demand remains flat. Meanwhile, rental income in the region’s most sought-after vacation spots continues to rise.
“For second-home owners, European cities offer culture, connectivity and a good quality of life, while for investors, high tenant occupancy and relatively low purchase costs,” Kate Everett-Allen, head of international residential research at Knight Frank, told CNBC.
Investors are looking for safe-haven assets and income-generating investments as inflation soars and interest extends across the Atlantic.
However, like any other investment, buying real estate is a big financial commitment and it’s not always clear where to start. Based on data from Knight Frank, CNBC presents an overview of the best places to start looking for a second property in Europe.
The biggest cities where real estate prices are rising
If you are looking for opportunities to increase your capital, pay attention to the ever-alluring cities of Western Europe.
According to Knight Frank, last year price growth in Europe’s best real estate markets, which are classified by value, was 5 percent. largest market, was one of the largest in the world.
In the year until 2022 in June the fastest price growth was in Berlin, Germany, where high-end real estate rose by an average of 12.6 percent.
This annual growth puts the German capital well ahead of other global cities such as New York (7.3%), Hong Kong (3.1%) and London (2.5%).
Elsewhere, property prices have grown rapidly this year in Edinburgh (11.2%), Dublin (10.2%), Zurich (10.2%) and Paris (8.9%) in the high-end real estate markets.
Growth rates are slowing across the global real estate market amid rising interest rates and a worsening economic outlook. But according to Knight Frank, the slowdown is not yet reflected in property prices, with the luxury sector particularly resilient.
“Rising interest rates and a deteriorating global economic outlook are dampening the enthusiasm of the past two years, but the slowdown will be most felt in lower price categories and domestic markets,” the report noted.
However, buying property abroad is not without its challenges. Before buying abroad, potential buyers should consider foreign exchange rates, local loans and taxes, ownership and selling costs, and any restrictions on foreign owners.
Best places to get rental returns
If you’re looking for a property to buy or rent, the best European holiday destinations may be for you, with the Mediterranean coast always popular with holidaymakers.
In addition to the factors already mentioned, there are several other factors to consider when buying a vacation rental. These include location, i.e. its convenience, whether it is close to international airports, year-round demand to minimize empty periods, and market liquidity.
Based on these criteria, Italy’s Tuscany and Liguria regions, France’s southern coast and the French Alps, Spain’s Barcelona, Marbella and the Balearic Islands are among the best places in Europe to invest in rental property, according to Knight Frank.
Only in Tuscany in 2021. recorded 30 percent higher number of inquiries compared to last year and this region accounts for two thirds of all property searches in Italy.
The Tuscan town of Lucca on the Serchio River is a particularly popular choice – in 2021. along with the cities of Pisa and Bolgheri, it will account for a quarter of buyer enquiries, and its prices will grow by 6% annually, according to Knight Frank.
The average price requested by Knight Frank buyers for real estate in the cities of Lucca and Pisa is currently around 1.7 million. euros (1.8 million US dollars) – significantly lower than the Tuscan region’s 3.7 million. euro average. Meanwhile, the average daily rental price is 471 euros.
Competition among buyers is intensifying
A strengthening dollar and a weakening euro are heating up the European real estate market, and the continent is becoming an increasingly attractive destination not only for US vacationers, but also for American real estate investors.
Currently, the euro exchange rate is almost equal to the dollar exchange rate, which means that US buyers benefit from 15-20 percent. a discount on real estate prices in any of the 19 eurozone member states compared to 2021. July.
And it can be seen. During the first five years of 2022 months, Knight Frank recorded 37 percent. more French real estate searches by US buyers. Now their search circle is expanding across the continent.
“In the past, interest in the US has focused on cities that offer culture and connectivity, from Rome to Paris and from Barcelona to Florence,” said Mark Harvey, head of Knight Frank’s international division.
“But now we’re seeing US buyers focus on traditional sunbelt locations, which is a departure from the norm,” he continued, citing growing interest in areas such as Mallorca, Sardinia and the south of France.
As the US Federal Reserve tightens monetary policy faster than the European Central Bank, the dollar may continue to appreciate, making Europe a competitive investment destination for some time to come.
“The Federal Reserve will continue to raise interest rates, so the dollar will continue to strengthen against the euro and US buyers may be subject to higher discounts,” added Kate Everett-Allen.