Best cities for investment: where to buy real estate in 2018
Most investors in overseas property choose one of two strategies: they buy the property at a low price and sell it in 1-2 years or invest in a steadily growing market and receive rental income for 5-15 years.
Strategy, in turn, determines the choice of the market. The international real estate broker Tranio studied the price dynamics in 40 cities of the world over the past 10 years and found out where it is profitable to buy housing for two types of investors in 2018.
For resale in the short term
When investing in real estate for resale, a simple principle is important – buy as cheap as possible and realize more expensive in a few years. Markets that are at the beginning of the recovery phase are suitable for this strategy – they have already reached the bottom and are starting to grow.
For example, Athens is one of the last cities in Europe, where prices have not yet risen after the 2008 crisis: according to the Bank of Greece, from 2008 to III quarter of 2017, property values are 44%. However, the economy of Greece is gradually recovering, the tourist flow is increasing, so it is likely that the market will start to grow in the next couple of years. According to company Trading Economics, housing prices in Greece from 2017 to 2020 will grow by 24%.
Spanish cities have great potential for growth, especially in Valencia, where, according to the portal Idealista, housing costs 40% less than the 2007 maximum. The activity of investors in Valencia was influenced by the recent referendum in Catalonia. “If those who live in Spain and are looking for residential real estate in Barcelona for themselves, continue to search, then investors have focused on Valencia,” said Maria Kamysheva, project manager for Spain in Tranio. Real estate in Barcelona is on average 2.5 times more expensive than in Valencia, and prices are almost equal to the pre-crisis values.
Investors in the Madrid market are promising for investors, where housing costs are 13% cheaper than in 2008. According to experts, including the Association of Developers of Madrid (Asprima) and the Spanish commercial bank Bankinter, property prices in Spain will increase in 2018 from 4 to eight %. According to experts of the business school Instituto de Práctica Empresarial, Madrid will be the leader, where the cost per square meter will increase by 10.8%.
Other cities of interest for investment are Bucharest, where prices are still 30% lower than in 2008, Zagreb and Dublin, where accommodation is cheaper by 20% and 10%, respectively. In Warsaw, there is still a small growth potential – the cost per square meter is 12% lower than in 2008.
Lisbon and New York, popular with real estate buyers, came very close to pre-crisis prices (the difference since 2008 is 1.5% and 3.5%, respectively). The growth potential here is not as significant as, for example, in 2012–2013.
Among the cities considered the cheapest in relation to 2008 is real estate in Kiev. According to the portal Domik.ua, prices in dollar terms for 10 years fell by almost 60%. Although in 2017, for the first time in four years, housing in Kiev has risen in price by 15% in currency, it is still too risky to invest in this market.
To preserve capital
In order to save capital and earn money on a long-term increase in value, you should choose cities where real estate prices rise steadily over an extended period of time.
The real estate price in Istanbul has increased most significantly: from 2009 to 2017, the cost per square meter in this city has tripled. Neither political instability nor the threat of terrorist attacks affected Turkey’s largest market. It can be expected that in the coming years, prices will continue to grow due to strong domestic demand, the return of Russian buyers, the weakening of lira and the new citizenship program for investments (the purchase of real estate worth from $ 1 million).
Traditional markets for capital preservation are German cities. Prices in Berlin and Munich have steadily increased for 10 years, and during this time real estate has risen in price more than 2.5 times. Some experts believe that a bubble is about to burst in these markets. Nevertheless, according to Fitch Ratings, real estate in Germany will continue to grow in price – in 2018 growth will be 5%. Due to the fact that housing in these markets has become quite expensive (in Munich, according to the portal Wohnungsboerse.net, the average cost per square meter exceeds 7 thousand euros), investors are increasingly choosing smaller cities in Bavaria: for example, Ingolstadt, Landshut , Regensburg and Fürth, where property prices are 1.5–2 times lower.
Luxembourg can boast a less rapid, but equally stable price increase. According to Eurostat, real estate in this market from 2008 to 2017 increased in price by an average of 5% per year.
Reliable locations outside of Europe – Toronto and Sydney. The cost per square meter in these cities over the past 10 years has more than doubled. According to Fitch Ratings, in 2018, real estate in Canada will rise in price by 5%, in Australia – by 2%.