Nery Alaev discusses European residential real estate.
Recently, a commentator in IPE Real Estate has indicated that the ‘globalisation of real estate investing’ has managed to reach the residential sector in Europe and has begun to make ripple effects in the sector.
I’ve decided to look into the news and conclude.
The article states that in Europe, there are differing levels of residential market volatility depending on political, demographic and institutional patterns in certain nations. The commentator states that:
‘Taking a closer look at the performance of the individual countries over the medium term (10 years), an interesting picture emerges. Higher volatility in residential investing generally does not seem to go hand-in-hand with substantially higher returns.’
This is followed by:
‘To understand the differences in the aggregated figures, one has to look at the political, demographic and institutional landscape in each country.
As a consequence, these historical numbers can only function as a starting point for developing a residential investment strategy – for example, the institutional changes in the Netherlands, the UK, Germany and Denmark in recent years imply very different expected returns in comparison with historical observations.’
The commentator goes on to conclude that a national and/or local network is needed for any kind of Pan-European investment programme. Also, a good understanding of a specific nation’s regulatory framework is needed for success.
Student housing and other assets
I’ve written about the prolificacy of student housing in Europe previously – the IPE Real Estate piece is quick to point out that student housing, alongside serviced apartments and micro-apartments, is a fast growing and normalising sector of the real estate market in Europe.
Despite this, the sector still faces challenges from other market sectors that have political backing, such as the professional rental market.
In summary, an interesting insight into the changing market and some good advice for those developing potential strategies for investment in Europe.
Nery Alaev is the current Director of ESN Investments GmbH, which engages in acquisition and development of commercial and residential property in Germany and Austria.