Cauta Capital on the top real estate investment hotspots across Europe

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As the UK and Europe wait for the extended Brexit deadline of 31 October 2019, there is a high level of interest in where to focus investment activity in the real estate market. What are the real estate property hotspots?

Investors are watching major European cities to see where they’re best placed to get involved with both commercial and residential developments. Various factors are informing decisions, and Brexit is one of the most significant for European investors. 

Brexit effect on real estate property hotspots

Key companies are leaving the UK, such as Aviva and Barclays, and setting up operations elsewhere. This will lead to new commercial centres in European cities, and the time for property investors to make a move is now – as it is likely that local prices will soar out of reach when the dust settles. 

This is not a matter of new start-ups moving location, rather relocating large, established organisations that already have a global presence. This will bring people who need somewhere to live, with the money to spend. Housing markets in these cities of relocation will adapt fast. 

Second cities are key property hotspots

A consortium of real estate brokerages across 70 countries, LeadingRE, told Forbes that the biggest hotspots in 2018 across Europe are the “secondary markets”. So, while cities like Geneva, Paris and London are still priced highest in terms of property, other cities are beginning to emerge. These secondary cities will be very popular with investors from all over the world, as there will be higher returns. 

The Emerging Trends in Real Estate: Europe 2019 report from PriceWaterhouse Coopers and the Urban Land Institute shows data collected from 885 respondents across 22 countries in Europe. Top level figures show that just over two-thirds say they are worried about asset availability, 80% are expressing concern about instability caused by international politics and 30% are focusing on lower returns.

Cauta Capital’s CEO William Abundes says: “It’s clear that while real estate leaders across Europe are cautious regarding the impact of international politics, on the whole optimism is the watchword for 2019. Brexit is certainly one of the biggest concerns in the mind of many real estate leaders, particularly in the UK. However, global investors are not as impacted by Brexit as those in Europe.”

Traditional investment structures are shifting 

The PwC report shows that the whole industry is reconfiguring in response to disruption in the traditional structures. This is pushing real estate into a broader concern for many. Almost 50% of those surveyed expect assets will be less available over the next five years. This is focusing investors more on alternative real estate, including shared living and student accommodation. Others are turning their attention to value-added development. 

In terms of country and city hotspots, there is a shift in investor attention. Some of the traditionally strong major European markets are seen to be at their peak, with focus moving to smaller, more dynamic cities. Overall investor prospects are best in Lisbon this year, a city which has risen from number 10 in 2018 to number 1 for 2019. Investors say this is due to the perceived quality of life and positive leadership in the city. 

Portugal is enjoying economic growth and Lisbon is very much on the map as an international destination for investors, tourists and businesses. The top 10 countries for property investment in 2019 show a mixture of smaller cities like Lisbon, and the big traditional players. Mr Abundes adds: “I’m not surprised to see that cities in Germany continue to be regarded as those with the best development and investment prospects. There are also many opportunities in the Nordic countries, which are gaining ground.”

Property hotspots for 2019 (versus 2018) 

  1. Lisbon (Berlin)
  2. Berlin (Copenhagen and Frankfurt)
  3. Dublin  
  4. Madrid (Munich)
  5. Frankfurt (Madrid) 
  6. Amsterdam (Hamburg)
  7. Hamburg (Dublin)
  8. Helsinki (Stockholm) 
  9. Vienna (Luxembourg) 
  10. Munich (Amsterdam)

Mr Abundes says: “Investors must keep on top of various indicators to identify the best real estate opportunities for them. Factors influencing the economic outlook in Europe are shifting. The way people are choosing to live is changing and this is fundamentally altering the demand for property.

“There is little doubt that investors should be looking to second cities for opportunities, in commercial and residential property. Several countries in Europe are still recovering from various economic crises, however international investors should remain positive. 

“Real estate investment is still strong in Europe, and investors are continuing to flock there. This is particularly the case in Germany and across several cities in Denmark and the Nordic countries. Despite the fact that property assets are trading some low yields in some countries, the demand remains high.”