Expat Investors-Whether it’s a luxe vacation property to spend your summers lounging under the Tuscan sun or a lucrative rental property along the Mediterranean to earn some extra income, Europe’s prime real estate market is a smart option to consider.
Impressive growth in the EU real estate market (5.6% according to Knight Frank’s Wealth Report), a falling Euro, and culturally rich and scenic cities to choose from make Europe an exciting and attractive destination for expats to buy a second home.
But, with so many stunning regions to choose from, how do you know where to buy? Experts say the first thing you need to ask yourself when buying a second home is what is your purpose:
- A safe haven to invest some cash abroad
- Income-generating rental
- A hybrid property (vacation home for yourself for part of the year and Airbnb rental when you’re not using it)
- An alluring second home to spend your holidays
Location, location, location…
No matter what your specific purpose for buying a second property is, experts say the number one rule in real estate applies – “Location, location, location” – meaning identical homes can increase or decrease in value due to location.
Holiday hotspots almost always increase the value of your investment. Up-and-coming areas are a smart choice too. Metro area apartments near big universities are great for short-term rentals.
Accessibility to International airports and direct flights to your destination can also affect your decision – just how prime the location is will help to narrow down your options.
And, while Europe’s housing market value has been increasing, it has been seeing more and more interest from foreign investors in recent times, especially from American buyers.
Analysis by Knight Frank shows property searches for French property by US-based buyers increased 37% in the first five months of 2022 compared to the same period a year earlier. In Italy, Tuscany recorded a 30% jump in inquiries.
The firm cites three motivating factors: the currency play (with the Fed tightening monetary policy more aggressively than the Eurozone to combat above-target inflation the dollar is appreciating against the euro), a strong accumulation of US household wealth during the pandemic, and two years of closed borders.
What are the top areas for price growth?
According to UK estate firm Knight Frank, in the past year, Western Europe is in the top 5% of the global market in value terms, which makes it one of the most attractive regions to invest.
High-end property price appreciation has been especially strong in these European cities in the year to June 2022:
- Berlin, Germany 12.6%
- Edinburgh 11.2%
- Dublin 10.2%
- Zurich 10.2%
- Paris 8.9%
Other parts of the continent are experiencing a similar trend. Portugal – with its “Golden Visa” investment program and ever-sunny Spain has also shown strong growth due to growing interest from expat investors.
The storied islands of Greece are another popular destination – requests from Americans looking to move there rose by 40% in April-June this year compared to 2021, according to Sotheby’s International Realty.
What are the best places to buy a rental property?
A major concern for those who buy a second home abroad is finding someone to watch your home while you are not there.
Newer developments often offer management services that will take care of everything from letting a plumber into your vacant home to renting it out for the short term.
There also are property management companies, usually operating in larger cities or areas with concentrations of vacation homes, that will help owners with standard security and maintenance issues for a fee.
According to Knight Frank, the highly desirable Mediterranean region is a hotspot for holiday seekers, making it tops for investing in a lucrative rental property, with the most popular areas being:
- Tuscany, Italy
- Pisa, Italy
- Côte d’Azur (French Rivera)
- French Alps
- Barcelona, Spain
- Marbella, Spain
- Balearic Islands (Mallorca, Menorca, Ibiza)
The estate firm says the Mediterranean areas are tops for rental investment properties based on location, proximity to local amenities, accessibility to international airports, year-round demand to minimize void periods, and market liquidity.
Lower house prices, lower transaction costs, and tax benefits helped to boost Italy to the top spot for second-home rental purchases, according to Sotheby’s.
Additionally, there’s effectively no capital gains tax after five years, inheritance tax is low, and the Italian government will pay extra for renovations that improve a home’s energy efficiency under a new government policy.
Resources to Help
Whether you’re a first-time buyer investing in the European real estate market or are just looking to increase and diversify your portfolio, there are many resources to tap into, including:
- Aisa International offers investment strategy and portfolio planning in many European countries, including wealth management services for expat real estate investors.
- Transitions Abroad is an online portal with dozens of links to resources for those moving and/or living Abroad.
- Broken down by specific region, Online Marketplaces lists the top real estate property search portals of Western Europe for 2022.
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The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain up-to-date personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not accept any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.
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