From the UK to Abroad: Is Investing in European Property The Right Move?

13 Nov 2023

In today's interconnected world, diversifying your investment portfolio beyond your home country's borders has become increasingly attractive. Overseas property investments offer a unique opportunity to expand your horizons, potentially tap into emerging markets, and hedge against economic fluctuations in your home country.

The Appeal of Overseas Property Investments

Investing in overseas property presents a compelling opportunity for investors seeking diversification and enhanced returns. Beyond financial benefits, such as potential appreciation and rental income, it offers the allure of owning a tangible asset in an attractive location, often with lifestyle advantages like access to vacation destinations or emerging markets.

These properties can serve as hedges against economic volatility, as real estate often appreciates over time, and they can provide a sense of stability in a broader investment portfolio. By including international real estate in their investment strategy, investors can harness the power of global market dynamics and enrich their overall portfolio, making it a compelling choice for those looking to balance risk and reward in their investment endeavors.

Abstract European Union flag

Considerations for Overseas Property Investments

Before embarking on an overseas property investment journey, it's crucial to do research into the different property markets.

Fortunately, at IP Global, we do that work for you where we investigate the property market, legal framework, and tax implications in the desired country for property investment.

Extensive research has gone into markets such as Germany and Portugal and we have found those two have proven to have lucrative opportunities for property investment. When considering rental income, factoring in operating costs are essential. Our sister company, Complete Prime Residential are a leading global management and lettings company that can help with all the administration and tenant relations to ensure you maximise your rental income and minimise your void periods.

Aerial view of Berlin with Alexanderplatz tv tower - Germany

Benefits of Property Investment in Germany

Germany, the economic powerhouse of Europe, has long been regarded as a haven for stability and growth. Its robust economy, characterised by low unemployment rates, consistent GDP growth, and a thriving industrial landscape, has made it a magnet for investors seeking safe and lucrative opportunities. Germany’s GDP is estimated to be €3.87 trillion, ranking them the 4th highest in the world.

This stability extends to the German real estate market, which has consistently demonstrated resilience even during economic downturns. According to Oxford Economics, the real estate market is forecast to see 28.9% growth in house prices over the next 10 years.

Germany's reputation for real estate investment safety stems from several factors. Firstly, the country's stringent legal framework and transparent property registration system provide strong protections for property owners. Secondly, Germany's stable economic environment and low interest rates have contributed to steady property value appreciation over time.

Thirdly, the country's well-developed infrastructure, high quality of life, and strong tenant protection laws make it an attractive place to live, ensuring a steady demand for rental properties. Germany, according to FDI Intelligence in 2023, has been ranked the ‘Best Country for Foreign Investors in Real Estate’.

Germany's rental market presents a compelling investment opportunity for both domestic and international investors. The country's strong economy and growing population have created a high demand for rental properties, particularly in major cities like Berlin, Munich, Hamburg, and Leipzig. This demand, coupled with the general housing shortage, contributes to consistently increasing rental yields, making Germany's rental market an attractive source of passive income.

Popular Cities and Regions for Property Investment

Germany offers a diverse range of property investment opportunities across its various cities and regions. With prime rents on the rise and above the five-year average by 2.8%, some of the most popular areas for investment in the current market include:

  • Berlin: Germany's vibrant capital city, known for its dynamic culture, thriving start-up scene, and affordable property prices. According to PwC, Berlin is ranked in the Top 3 European Cities for Real Estate Investment (2019 – 2023). New-build rents, compared to last year, have risen significantly in Berlin by 10%*.
  • Leipzig: A rapidly growing city in eastern Germany, offering a combination of affordability, cultural attractions, and a promising future. Leipzig has also been voted the 5th strongest startup hub in Germany. Leipzig’s prime rents have had significant growth, increasing by 9.9%*.
  • Munich: The economic powerhouse of southern Germany, renowned for its high quality of life, strong job market, and stable property market.
  • Hamburg: Germany's second-largest city, boasting a strong port economy, growing population, and attractive property prices. Rental growth is evident in Hamburg, increasing by 10.5% compared to the previous year*.

*Source: JLL Research, Housing Market Overview – H1 2023

Investing in German real estate offers a unique opportunity to capitalise on the country's economic strength, stable property market, and growing rental market. At IP Global, we have numerous properties available in Berlin and Leipzig, for more information, download the 2023 German Investment Case here.

oporto city with douro river and dom luiz bridge under blue sky, portugal.

Benefits for Property Investors in Portugal

Portugal, a European gem, captivates with its rich history, diverse landscapes, enchanting culture, and enviable climate. Its thriving economy is driven by technology, renewable energy sources and tourism with about 22 million tourists per year.

A strong focus on education has fostered a highly skilled workforce, fuelling business growth and innovation. With an economy worth 205 billion Euros and voted the ‘Best Country for Doing Business in Europe’ by the World Bank, Portugal has demonstrated resilience and steady growth, creating a favourable environment for investment.

Portugal's real estate market has witnessed remarkable growth, with major cities like Lisbon and Porto undergoing urban rejuvenation. Coastal regions like the Algarve and Silver Coast draw investment in luxury resorts and residential properties.

Portugal's rental yields are among Europe's highest. Oxford Economics forecasts a 15.2% growth in house prices over the next 10 years. The market caters to diverse properties, from single-bedroom apartments to opulent villas. Enhanced infrastructure, including airport expansions and high-speed rail developments, further strengthens Portugal's allure for investors.

Key Cities and Regions for Property Investment in Portugal

Portugal offers a diverse range of property investment opportunities across its various cities and regions. Some of the most popular areas for investment include:

  • Lisbon: The coastal capital city, known for its rich history, cultural attractions, and growing economy. Lisbon, according to Deloitte, has had an impressive average annual capital growth rate of 11.8% between 2018 and 2023.
  • Porto: The second-largest city, renowned for its charming historic centre, thriving port wine industry, and affordable property prices. Porto, according to Deloitte, has had an impressive average annual capital growth rate of 12.9% between 2018 and 2023.
  • Algarve: A popular tourist destination, known for its stunning beaches, golf courses, and luxurious properties.

Investing in Portuguese real estate offers a unique opportunity to capitalise on the country's economic stability, attractive tax regime, pleasant climate, and growing popularity among investors and lifestyle seekers. At IP Global, we offer properties currently in Porto, for more information, find it on our website here.

Diversifying your portfolio with overseas property is a prudent move in today's globalised world. Germany and Portugal, with their unique advantages and growth potential, offer enticing opportunities for UK investors. At IP Global, we are here to guide you through your investment journey and help you achieve your financial goals. We have a wide selection of properties that suit a variety of investors with one thing in common: strong growth potential and reliable yield predictions, take a look at what's on offer here.

FAQs

Portugal's real estate market has witnessed remarkable growth, with major cities like Lisbon and Porto undergoing urban rejuvenation. Portugal's rental yields are among Europe's highest. The market caters to diverse properties, from single-bedroom apartments to opulent villas. Portugal's unique blend of economic stability, vibrant tourism industry, educated workforce, and appealing lifestyle make it an ideal destination for property investment.

Germany is ranked, according to PWC, among the Top 3 Best Markets for Property Investment in Europe. Germany is an inclusive market, allowing foreigners to buy property in the country without any restrictions. Cities like Berlin and Leipzig offer attractive investment opportunities due to the high demand for housing and the rising house and rental prices. Key benefits of German Property Investment include low mortgage rates and tax efficiency.

Investing in property overseas can offer higher yields and returns as global markets are on the rise with low-cost entry points. This makes overseas property investment very attractive, even more so where some countries offer a tax incentive for non-residents.

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