Europe’s two most famous cities remain the most popular for real estate investment, according to recent research reported in Property Wire. The pole positions of these cities are contentious however, given the rise in investment from outside interests rises in German markets in particular.
Today, I’m looking into the changing market and the reasons why some urban areas are able to consistently outperform others.
The latest European Regional Growth Index (E-REGI) released by LaSalle Investment Management placed London and Paris at number one and two respectively for overall attractiveness in regards to real investment.
The attractiveness is based centrally on consistency, according to LaSalle’s report. The ability for a city to provide consistent economic strength (and thus, attractiveness to invest) is a major factor for investors.
The French and UK capitals topped this list, but the German cities of Munich, Frankfurt, Hamburg and Stuttgart all suited for “value-add and opportunistic strategies.”
Berlin and Leipzig-Dresden were ranked, among others, as ‘structural movers’ in the report. This means that they have the potential to move up in the ranks of the E-REGI.
The positive sentiment surrounding investment in German cities in the LaSalle report correlates with a rise in international investment across the country, reported in Europe Real Estate.
According to Europe Real Estate’s article, 50% of German real estate deals involved cross-border capital in 2015, compared to 20% in 2014. North American and French investors lead the way in investment, according to research by Jones Lang Lasalle. Asian investors are also growing in presence, with Korean pension and insurance funds leading the way.
Alastair Meadows of JLL said:
“Korean investors are the most active in the region, but where other Asian capital sources are concerned we’re seeing more bidding than buying at the moment.
Germany has become the second European destination of choice after London for Asian investors who are drawn in by attractive cash-on-cash returns driven by historically low financing costs.”
This sentiment clearly indicates that Germany is a rising prospect for real estate investors across the globe.
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.