New Emerging European Markets For Foreign Real Estate Investments
The COVID-19 pandemic has had significant repercussions on every industry, including the real estate sector. However, as things go back to normal, real estate developers and investors have started exploring new avenues to bolster their portfolios.
With a total valuation of more than $9 trillion, the European real estate market has caught the eye of new and seasoned investors alike. When you think of real estate investments in Europe, prominent cities, such as Berlin, London, and Paris, instantly come to mind. However, foreign investors have plenty of opportunities to reap the benefits of emerging markets in Central and East European countries. Despite the economic turmoil of 2020, the region recorded a total of €9.7 billion in real estate investment transactions. That figure is projected to skyrocket in the coming years.
We’ll dive deeper into the hottest new European markets for foreign real estate investments in the following sections. Let’s get started.
1. Georgia (Tbilisi)
Georgia’s real estate sector has witnessed significant growth over the last few years. The development of state-of-the-art projects, such as David Kezerashvili’s Vake Plaza in Tbilisi, propels the industry further.
Situated close to the city centre, Vake is an upscale neighbourhood in Tbilisi known for its fine dining restaurants and tranquil ambience. It’s also the area with the highest density of ex-pats, making it ideal for investors from foreign countries.
The university district of Saburtalo is another neighbourhood that’s grabbing the attention of investors. It’s a more affordable alternative to the sky-high real estate prices in Vake. However, it is essential to pay attention to investment advice by David Kezerashvili. According to the real estate developer, investor, and former Defence Minister of Georgia, the country’s real estate sector is prone to government interference.
The absence of a proper legal framework makes it difficult for developers to gain complete control of their projects. Also, that leads to an abundance of conflicting information at local, state, and federal governments.
Kezerashvili believes that the market presents an ocean of opportunities to foreign investors despite these limitations. But he advises investors to be prepared to navigate through a bureaucratic system plagued with remnants of Soviet policies.
2. Poland (Warsaw)
Poland is one of the top contenders as a relatively stable and safe market for real estate investments. In 2020, the country dominated the CEE real estate investment market with total recorded transactions worth €5.6 billion. It’s the third-best result in Poland’s history. However, it’s worth noting that buyers and investors are prioritizing the industrial sector over other markets, such as housing. The retail industry has seen a surge of alternative assets, such as open-air shopping centres and retail parks. It’s understandable considering the changing shopping preferences of consumers due to the pandemic.
There’s also been a rise in the demand for high-rises and luxury residential properties in Warsaw. Warsaw’s thriving business sector and relative political stability have turned it into a lucrative market for investors.
According to a recent report by PwC, there’s also an increased interest in acquiring assets that can be repurposed and repositioned. It’ll help investors pivot when market forces change due to economic downturns, political conflicts, etc.
3. Hungary (Budapest)
Sustained economic growth and low unemployment rates have led Hungary’s capital to become the fastest-growing housing market globally. The city has particularly benefited from foreign companies opening new offices and luring potential investors.
According to Adam Ilkovits, CEO of a leading brokerage firm in Budapest, seasoned investors choose to buy properties on the outskirts of the business district. These areas offer more potential for appreciation, thus resulting in higher resale values. If you’re looking to invest in the housing market right now, Hungary is one of the most rewarding markets.
4. Czech Republic (Prague)
Economic growth in Czech Republic’s capital has created a class of thriving high-net-worth individuals with an eye for high-end properties. The so-called ‘nouveau riche’ focus on buying luxury properties that enhance their social status. If you’re looking to venture into the luxury housing market, Prague would be a great place to start. Experts believe that the growth of the premium housing segment will continue in the coming years.
The Way Forward
While the CEE real estate market is showing signs of growth, it’s expected to suffer minor blows due to the Russian invasion of Ukraine. The increased cost of construction materials combined with supply chain disruptions will escalate property prices.
Irrespective of the market you choose, you must have a clear idea of the underlying risks of foreign real estate investments. Also, you should have a deep understanding of government policies and legal regulations in that specific market.