According to the Global Capital Diversification (GCD) report, on the global real estate stage, the European market offers the most amount of diversity and opportunity and attractive pricing, especially on a global risk-adjusted basis.
In comparison to the weakness of markets and confidence in H2 2018, the return of a relatively solid economic expansion across Europe in Q1 2019 provides welcome relief. Real estate is well placed compared to other sectors and interest rates remain significantly lower than before, with supply holding up in a majority of cities. From the end of 2018, Helsinki and Lisbon were topping the charts relative to their five-year trading average, relative to other European locations. With Europe’s four largest economies recording expansion, European Union (EU) member states, grew by 0.5% in the first quarter.
Given the reception of the late market cycle, it is no surprise that structure-led sectors are currently favoured by investors. The European housing sector, including student accommodation, hotels and healthcare, are sought by investors who are keen to access the continent. The office sector has been unsettled by flexible office providers with its increasing focus on the user’s preference and changing family dynamics. Similarly, it seems likely that the residential sector will have to step up to provide solutions for the challenges in cost, needs for a community, and the dynamics of the workforce of the future.
However, all over Europe, residential property pricing is at different levels of sophistication, maturity, and demand. The residential sector is thriving due to its niche sectors such as micro-apartments, co-living, senior living and student housing. Retail on the other hand is becoming increasingly unpopular due to the rise of e-commerce.
Globally, Europe has become a continent of great interest for international investors. The Knight Frank World Wealth Report 2018 reports the world’s super-wealthy spend over USD 2.4bn on second citizenship each year, with most demand coming from China, the Middle East, and Russia. On average 32% of ultra-high net-worth individuals plan to purchase a new property outside their country of residency in the next two years, reports the Knight Frank World Wealth Report 2017. The UK, US, France, Switzerland, and Spain are the five most popular locations for second homes, while lifestyle is the most important factor while deciding on a location to reside in. However, Portugal real estate is currently the talk of the town, with Lisbon seen as the best performing city globally over the last three years.