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European Values

Winter may be creeping across the continent right now, but for some Europe is hot property. Cityscape takes a closer look at Europe’s hottest residential markets to invest in.

November 2015

The decline in value of the euro in recent years, coupled with the negative effect of the global recession on many of its property markets, have created a region ripe for investment by non-nationals.

For those willing to weigh up the currency and economy risks against the opportunity to purchase property assets at a snip, Europe offers a lot of opportunity.

According to Savills’ World Residential Markets 2015 – 2016 report, the five leading European markets to watch are the UK, France, Spain, Portugal and Italy.

In recent years, the most buoyant international markets have been the UK and Switzerland, in part because of their non-euro currency. However, increasing numbers of buyers are being attracted by cheap prices and stabilising economies.

“The euro has depreciated against major currencies since 2014, including the US dollar and UK pound. The ECB’s quantitative easing program, anticipated US interest rate rises in the medium term, along with the Greek crisis, have all contributed to the euro’s decline. This has made euro denominated property cheaper,” explained Paul Tostevin, Associate Director, World Research, Savills.

Markets such as Spain and Portugal are seeing resurgence, with a recent report by PwC also pointing to Spain and Portugal being ripe for investment. Its Emerging Trends in Real Estate – Europe 2015 report cites Madrid and Lisbon in the top ten markets to watch. Meanwhile, newer markets such as the Balkans, Bulgaria and Montenegro are also enjoying growing popularity with overseas investors.



Spain was seen as the second-home haven for many pre global financial crisis. In fact, housing starts peaked at 865,000 in 2006, as developers struggled to keep up with demand. Then the bubble burst and the money pulled out. In 2014 just 34,900 units were started in the country.

According to the Savills World Residential Markets 2015 – 2016 report, the weak euro has made Spanish property especially affordable to GBP and USD buyers, and as a result of the USD peg to most Middle East currencies, affordable to buyers from these markets also. “The Middle East is a rapidly growing source market for residential investment in the country – particularly at lower price points,” the report stated.

This demand has been fuelled in part by the rapid expansion of air routes to and from the Middle East with airport operator Aena reporting summer capacity up 36.6% for 2015 over 2014.

Spain is also an attractive investment option for Middle East investors because of its Golden Visa scheme. A EUR 500,000 investment in real estate provides non-nationals with a residency and working rights in the country. This incentive attracted 530 foreign nationals to invest in Spain between September 2013 and December 2014, according to the Savills report.

“Marbella has seen growing activity among Middle Eastern purchasers, and at lower price points than they have historically brought. Prices here are on the recovery and property in well-located areas, in close proximity to the coast and airports, offer the best rental potential,” explained Tostevin.


Portugal is another European property market that has benefited from the Golden Visa scheme. The same as Spain, non-nationals need to invest a minimum of EUR 500,000 in real estate to be granted a visa and – longer term – a route to an EU passport. Foreigners need only be resident in Portugal for seven days in the first year of residency, making this an ideal holiday home purchase.

According to Savills, the Golden Visa scheme has brought EUR 1.46 billion in investment to Portugal since its launch in 2012, with more than 1,500 visas issued in 2014 alone.

“Investors in Portugal through the Golden Visa scheme have concentrated on Lisbon – there have been relatively few in resort locations – and at prices close to the EUR 500,000 investment minimum,” Tostevin stated.

Today, Portugal’s economy is making tentative progress once again, with GDP up nearly 1% in 2014. The country did not fall victim to the same levels of over-development seen in Spain, and as such its property market has seen relative stability in recent years.

New rental laws have moved towards making buy-to-let property a more appealing proposition. Add to this the fact that there are no restrictions on foreign property ownership and transaction costs are low, and it’s easy to see why this is one destination to watch.

United Kingdom

According to the Savills report, the UK remains one of the most stable and profitable places to invest in Europe, with London still leading the pack – mainstream prices in the capital rose 14.9% in 2014.

The Economist House Price Index, released in October 2015, shows growth and future promise from the UK. According to The Economist, house prices in the UK have risen 11.5% from Q2 2009 to Q4 2014. In tandem with this, the new-found confidence in the market has seen construction pick up, with the latest Markit/CIPS UK construction PMI reporting 28 months in a row of growth and job creation.

While London is often the magnet for overseas investors, agents are urging clients to consider other locations in the UK.

“For years, many international investors have focused their efforts on London but in light of spiralling property prices in the capital, we are finding that some of the best opportunities can be found further afield.

“The buy to let market in the north of England, particularly in key hubs such as Manchester, Liverpool and Nottingham, is proving to be very rewarding, delivering strong rental returns combined with steady capital growth,” said Graham Davidson, Managing Director of Sequre Property Investment.

According to Davidson, Manchester currently offers strong average gross yields of 7.5%, compared to 4.5% in London, while a typical two-bedroom investment property costs in the region of GBP 90,000 versus GBP 400,000 in the capital.


According to The Economist House Price Index report, home values in Germany were largely immune to the global financial crisis that started in 2006/07, with prices rising 22.8% between Q1 2009 and Q4 2014.

PwC lists Berlin as its number one city to watch in its Emerging Trends in Real Estate – Europe 2015 report. According to the professional services firm, EUR 2.9 billion of deals were transacted in the first three quarters of 2014.

Meanwhile, Hamburg comes fourth on the PwC list. The city saw a 38% increase in property deals in the first three quarters of 2014, achieving EUR 2.4 billion. A big part of Hamburg’s increasing popularity is down to its 157-hectare HafenCity inner-city development project.


Spain, Portugal, the UK and Germany may well present safe bets for the foreseeable, but more adventurous investors should also consider central and Eastern Europe for property purchases.

Savills’ Tostevin points to the ski resorts of the Balkans as one area attracting attention, and not just from western tour operators.

“Kopaonik in Serbia has a reputation for ski in- ski-out properties, and attracts domestic, British and Russian skiers. A candidate for EU membership, foreigners may purchase freely in Serbia under a reciprocal agreement. In Bulgaria, Bansko offers access to Pirin National Park, a UNESCO world heritage site, while Borovets has been established as a winter resort since 1896,” he explained.

Tostevin also recommends Montenegro, which is emerging as a popular second home destination.

“Historically dominated by Russian and Eastern European buyers, the market has been sluggish in recent years, but a favourable exchange rate has triggered more British buyers, focused on the Kotor Bay area. Still an emerging destination for leisure property, it fits with our long-term view on the growing appeal for the authentic,” he said.