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property finance

Serious Contenders

14.01.20

‘Keep calm and carry on’ is the force-for-good mantra on what returns and risks we can expect in the coming year when investing in property. Serena Templeton sizes up the global movers and shakers

There’s all to play for it seems, in the world of property in the coming year. Construction activity is forecast to boom in 2020 and beyond, an uptick in contribution to the future of real estate from urbanising cities across Asia (most fast-paced region), Africa, the Middle East, and Latin America, as they work on making themselves centres of wealth creation. Overall, total construction output globally is projected to reach a whopping $15 trillion by 2025.

Closer to home and international investors are equally bullish about prospects, driving further growth in several European property markets, among them Berlin, Lisbon, Dublin, Rotterdam, and Zagreb which are all enjoying high levels of growth.

While physical space and location are still perceived as the foundations around which real estate value is created, shifts in investor expectations off the back of Brexit are now coming to the fore. One tangible consequence of the leave vote is closer integration between London and Continental European cities; a step-change that’s injecting fresh energy into many new property markets. Companies leaving the United Kingdom to put down blue-chip roots elsewhere are emerging on the European continent and property investors are scrambling to predict where they should allocate resources before local prices become out of reach. It’s these particular markets, comments property analyst, David Shepperton that will “cross the profit growth tipping point very quickly.”

“There’s little doubt that the current climate of uncertainty caused by Brexit is triggering a flight to safety, with many investors trying to shelter their capital from market turbulence,” he adds. “While the sure-footed winners post-Brexit will be those tried and tested destinations that have historically offered stability in times of turmoil, we’re most certainly going to see shifts in investor interest in those cosmopolitan cities that can grab the business coat-tails of post-Brexit London and take full advantage.”

Whilst London, Geneva, Paris and Monaco continue to command Europe’s highest property prices, industry voice LeadingRE, a consortium of 600 international real estate brokerages in 70 countries assesses how markets are performing, with Germany among a strong cohort forging ahead.

Comments LeadingRE spokesperson, Parikshat Chawla: “With interest rates at record lows, investors have been keen to deploy capital into German residential property that’s shown strong rental and capital growth - and Brexit is providing it with another boost. Major cities like Berlin, Hamburg, Frankfurt, and Munich are now making the top-ten lists of best places to invest in real estate. Rents in all four cities are also forecast to increase between 6-7% by COP 2020.”

Adds Shepperton: “Berlin is a far cry from the grey, impoverished city of the early 1990s. It’s now a thriving, cosmopolitan capital drawing a young, mobile workforce that’s fuelling demand for sales. The city today offers the same cocktail of international appeal, investment stability and price growth that previously drew investors to London.”

Small but vibrant, with a rich history and a dynamic economy, Dublin too, has witnessed a change in investment tempo and is now tagged to become a ‘policentric London’ thanks to a combination of clear legal framework, proximity to the UK and - a key advantage - the English mother tongue. Although Brexit sparked huge concerns in Ireland, most notably over the border with Northern Ireland, for Michael Young of agents Templeton Robinson, the country has “spotted a prime opportunity to attract international businesses looking for a European base.”

Head to Zagreb, the capital of Croatia meanwhile, and all the signs are there for a tipping point in the next few years and explosive growth. Adds Sania Gerba of consultancy Mi Doma: “The country recently saw its first digital real estate company, A Nekretine, open for business which is usually the strongest sign of a market’s potential. Asking prices for condos in this city increased by 20% in 2018 when the rest of the country only saw increases of 8.5%.”

Close by and several cities central and eastern Europe are also worth a look. Prague in the Czech Republic has undergone something of a commercial property boom in the last two years. Across the border in Poland, there has been development taking place in Warsaw; this has caught the attention of eagle-eyed investors. Another city seemingly on the verge of a boom is Bucharest, Romania. Investment in 2018, for example, was almost five times greater than in 2017.

Adds Karsten Bischoff of BNP Paribas Real Estate: “Europe is now offering opportunities both to safe-bet and opportunistic investors, those who are investing in the core markets with an expectation of a few percent return, and those who are investing in European countries to benefit from the property market uplift. It will be less of a case of watching this space, and more striking while the iron is hot.”

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