Buy Property in Europe that is profitable
Should you be concerned about low inflation while purchasing property in another country?
Some investors think a lack of inflation is still a factor. Based on the belief that we’ve always marketed real estate on the basis of the following argument: your money will always be secured against inflation — it’s hedge protection. Today, however, there is no inflation, or if there is, it is only a few percent. The answer to that is yes when investors question if it still counts.
As of June 2019, inflation in the Eurozone was 1.3 percent, and it is not predicted to rise much in the future years. If inflation continues to rise for whatever reason, real estate investors may gain since, in addition to a potential appreciation in the prices of their assets, rental contracts are often indexed and evaluated upwardly on a regular basis because they’re in the United Kingdom.
A lack of inflation that lasts for a long time would’ve been terrible news for a real estate investor. But, in the event of devaluation, we also witness a drop in asset values, which isn’t good news. Inflation remains, and we want to see a return to a healthy 2% inflation rate in the future years – albeit we must be patient, as ECB President stated.
The European property market has been robust in recent years, followed by a period of housing and economic crises. International investors remain optimistic about the future, fueling growth in a number of European real estate markets in 2019. Even in the United Kingdom, despite the post-Brexit uncertainties, major cities also including London and Birmingham continue to grow. But how appealing is owning property or to buy property in Europe to investors? And, more significantly, can property investors enjoy a positive return in the current environment?
Why do property investors continue to flock to buy property in Europe?
Everyone was anticipating the collapse of Europe, especially continental Europe, just a few years ago. However, as buyers flock to the markets, property values have continued to rise; Berlin, Lisbon, and Zagreb are some of the European cities seeing rapid development.
However, European real estate markets, are extremely expensive. Given the high frequency of crises and the incredibly low yields on property assets, the underlying worth of properties is quite high. So, how is it that a continent with weak economic growth and yet still inflation – though slowly improving – manages to attract international investors?
The answer is simple: it all has to do with the European Central Bank’s (ECB) monetary policy, but that has nothing to say regarding real estate. The European Central Bank (ECB) adopts a loose monetary policy, maintaining interest rates artificially depressed; on July 25, 2019, it chose to maintain them unchanged at 0.00 percent, 0.25 percent, and -0.40 percent for as long as needed. As a result, investors see no other option but to invest in real estate. Stocks are dangerous because they are unpredictable, and bonds are pricey since rates are still at historically low levels.
The reality of European real estate investments
Even though it is costly and rates are low, real estate still provides a cash yield of just a few percent, which is a significant return when compared to other investments that give zero interest. However, in other ways, the ECB’s monetary policy is also hazardous because it supports property values.
The reality is that several developing economies are in crisis due to poor growth rates, political unrest, falling commodity prices, and currency volatility. Because of these issues, wealthy investors from emerging nations are flocking to buy property in Europe to diversify their portfolios. To buy property in Europe was indeed a complete write-off for investors a decade ago, but the same investors are again investing in Europe.
Everything we’ve been predicting has come to pass. Property markets are doing well in general, with a lot of international capital flowing through them. I, however, anywhere in Europe, there is still the possibility of a stronger economy and increased inflation, which would benefit your investment. This is the primary reason for the strong performance of real property in mainland buy property in Europe and rebounding markets.
What will happen to European interest rates?
For years, everyone projected higher interest rates, but they were all wrong. Rates of interest are very low — at best, they are stabilizing – and they’re not growing much. Europe is currently experiencing interest rates that are mainly below 1%.
What may European realtors expect in terms of returns?
Returns in Europe’s key markets are likely to be positive, albeit on the cheap side. You may not earn 10–15 percent each year, but you may earn a few percent per year in cash. However, if you invest in markets with a more difficult recent history, such as Spain (which is swiftly improving) or Greece, then you may be able to make massive benefits if the economies improve.
What else should you understand before investing in European real estate?
You should check the following fiscal consequences for each country:
What local taxes you must pay; whether you must pay capital gains taxes; what happens to your property if you die; and whether you must pay inheritance taxes.
In the future years, your expected revenues on property investments are likely to fall. After all, it’s logical to expect a rise in taxes, fees, and costs in many European countries. In fact, taxes are rising, and some mortgage assistance programs are being phased out, as seen in the Netherlands.
For better profits, what kind of assets in Europe must investors consider?
The desire for smaller homes is a prominent European property sector. They are no longer interested in purchasing huge villas, which are both costly to purchase and maintain. The elderly, in particular, have money, yet they typically cannot afford to maintain large homes. Younger individuals may lack the financial means but are unwilling to devote the time necessary to manage huge properties. As a result, we see increasing vacancies in the luxury class, with huge villas dominating the market.