The old continent has certainly undergone some changes in the past year. Even the strongest economies in the world, most of them being in Europe, were heavily afflicted by the COVID-19 crisis – perhaps even more than the weaker, developing nations. The real estate market, while being less vulnerable to the disease’s consequences, had still taken a blow.
Now that things are showing early signs of returning to normal, as mass vaccination programs are underway throughout the continent, it is time to start thinking about future investments again. However, even if European real estate is where your mind is, the question of where in Europe you should put your money still remains.
My name is Ofir Bar, and I have ample experience in real estate investments around the world, as well as in tech startups and entrepreneurship. I will compare between real estate investments in the eastern and western parts of the continent, in order to figure out which one is best suited for you. However, as always, you must remember that these are assessments and projections, not guarantees in any way. The future’s not ours to see, as Doris Day once sang.
Distinction between East and West Europe is not necessarily a geographical matter. In general, the wealthier countries of Europe are considered West, while the poorer ones (mainly those who used to be part of the USSR or Soviet allies during the cold war) are considered East. That’s an important difference here since real estate might be more expensive in the West, but profits from rent and growth in value are also higher accordingly.
Hence, your decision should be first and foremost based on the amount of capital you are willing to put on the table. I’m not talking about the amount of money you currently have, since you shouldn’t rule out taking a loan or a mortgage, but rather about your budget and spending limit. Keep in mind that value in real estate becomes significant only in the long term, so the money you are willing to put in is money you can deal without for a few good years.
Another factor to be noted is the fact that most Western European nations (and a small fraction of the Eastern European ones) use the same currency, and therefore their monetary systems are interdependent. As the Euro’s rate keeps reaching new lows, this is an important factor to keep in mind, especially relative to the currency you are using to fund your real estate deal.
In general, real estate value rises steadily, meaning that a decrease in value is highly improbable. We’ve witnessed that in the past year, with the influence of COVID-19 on the real estate market being insignificant overall. However, when the money’s rate keeps declining quickly, it kind of makes the rise in property value obsolete.
I don’t see an end to this Eurozone crisis in the near future. Therefore, while buying real estate property in Euro-denominated countries may seem relatively cheap right now, don’t count on the Euro’s rate to be the profit factor here. That is true, though, for East European currency rates as well. The Hungarian Forint, for example, has been on the rise in the past year when compared to the Euro, but the same can’t be said about the Romanian Leu.
What’s your type?
There are three main sectors of real estate: industrial, commercial and residential. This is important because the sector you choose impacts the decision between East and West Europe. East Europe, for example, offers more diverse industrial real estate possibilities. Keep in mind that Europe has undergone unification processes, which have made it sort of like one country in a sense. What I mean is that the industrial areas of Europe, mainly the low-tech factories and plants, are now more concentrated where land value and manpower is cheaper – the East.
On the other hand, if you’re looking to invest in residential real estate, it’s probably going to be more attractive where the demand for housing is higher – in the more developed and populous countries of West Europe. There, you can also find more diverse real estate projects, such as green housing and properties combining residential with commercial or office real estate. These won’t come cheap, since demand is high, but they can probably yield good profits.
So, East or West?
I hope that I, Ofir Bar, have helped you reach a decision, or at least have made things a bit clearer for you. Ultimately, your budget and investment goals are going to be what affects this decision most. Either way, you should not take it lightheartedly, since we’re talking about a significant sum of money, with a long-term point of view dictating your moves. Good luck!