Paris Property Prices Outstripped Rest of France in 2010

Paris property prices enjoyed double-digit increases last year as opposed to the rest of France where prices remained more or less static. In the Paris metropolitan area prices rose by an average of 12% which compares very favourably with a rise of just 0.6% throughout the rest of France, and there is little doubt that continuing low interest rates helped to fuel this rise with rates at their lowest levels since World War II.

The housing boom in France lasted 10 years from 1997 to 2007 with the price increases peaking in 2004. When the economic downturn began to bite prices decreased by nearly 12% in 2008, but apartment prices in Paris had risen 115% during the boom meaning some investors still enjoyed excellent capital growth returns. The rent index which rose by just 29% during this period. Although initial rents can be set freely they can only be revised once a year and there are strict limits as to how much they can be increased by due to the INSEE rental index.

This means that the rental market within France is constrained as there have been certain periods where the allowed rent increase has been below the rate of inflation. In addition there is quite a large social housing sector which holds about 17% of the housing stock, while 21% is held by the private rental market. However the number of people who choose to rent a home rather than buy is much higher in France than in the UK, and rental property in Paris will always be in demand due to the high numbers of people who choose to move there for work.

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Spanish Developers Lure Buyers with Great Deals

Despite the fact that Spanish property sales have reportedly been improving for the last several months, developers continue to take seemingly extreme measures to lure buyers.

Costa Almeria development Balcones de Palomares is a good example just added to the Azure Overseas portfolio. Anyone not bowled over by the price; just £68,469 for a key-ready 2 bedroom apartment in a quiet and secure development near the coast and with white good included, probably will when they realise that 100% mortgages are being offered with properties in the development.

Most buyers of Spanish property in the last 2 years have been cash buyers, equally because wealthy individuals made up the majority of buyers, and because mortgages were scarcely available. Slowly but surely buyers who need mortgages (low budget buyers) are returning, and thankfully more mortgages are coming up as well.

The price is the most impressive thing here though, well designed, quality 2 bedroom apartments in a nice development with a communal pool in Andalusia, Spain for not much more than you would pay in Turkey is truly a bargain.

Low prices like this in an established market like Spain is always good news for investors; the low price means you can set your rental rates lower and sill make a strong yield. Not to mention capital growth potential, in the fact that Spain will recover, and when it does these units will quickly double in value, then go to 150% of their current price.

Berlin Property Prices Lowest in Industrialised World

Berlin property prices are lower than in any capital city in the industrialised world, according to a new comparative study by Engels & Volkers, although it is not the first time this has been reported, and it will probably not be the last either.

In Mitte, the upmarket district of Berlin, top end apartments currently go for an average price of 3,500 Euros per square meter, which is a fraction of the price of a comparable unit in the financial district of New York.

Engel and Volkers declared Berlin's history of division as responsible for its failure to grow like other capital cities.

"We have only begun to see things changing here in the last ten years. But, compared with other major cities, the impact of this on the property market is rather minimal," said Anne Riney, managing partner of Engels & Volkers in Berlin-Mitte.

"It will take a long time yet before the market reaches anything like the price margins of London, Tokyo, New York or Paris. Until then, Berlin will remain the world capital with the lowest-priced residential property," she added.

It is true; history is a huge part of the reason why Berlin property prices are so low, but not in the way laid out by Engels and Volkers.

Only 40% of Germans own their own homes, much lower than the developed world average of around 70%. The status quo has developed over the years, and the renters culture is now deeply entrenched in Berlin.

Because of the situation, the government imposes controls on rental rates, allowing rents to rise only when wages rise. Because the biggest buyers of property in Berlin are buy to let investors, price rises are governed by rental rates. This vicious cycle has kept the lid on Berlin property prices for years.

Greek Tax Changes to Have Big Effect on the Market

As some of you will know there have been some pretty sweeping changes to the Greek taxation system in relation to property purchases and sale. Usually when a government does things like this it is easy to pick out their motive, but this time it is unclear whether they are trying to revive foreign sales, increase tax payable for commercial transactions, both or something else entirely.

Firstly and perhaps most importantly for the market, the annual levy on properties held by foreign companies and funds was increased from 3% to 15%. This will almost certainly be reduce investment in Greek property by international real estate investment trusts (REITs) and other commercial funds.

On the flip side, the 1% property transaction duty and capital gains tax on property were both zeroed, and transfer tax reduced from 11% to 10%. This should be good news for many foreign buyers.

Not all buyers will benefit however, because VAT on new build homes was increased by up to 2%, which will cancel out some of the benefits to new build buyers.

The changes won’t drastically reduce demand from foreigners buying privately, if correct advice is given, says Peter Mihalos, president of Southeast Real Estate Group.

“A ‘normal’ foreign buyer will actually see a small discount in the transactional tax due,” he told Overseas Property Professional.

“Furthermore European Union citizens are also eligible for various tax breaks, especially if they are residents here.”

The changes could bring about a 20% reduction in Greek property prices as investors give the country a wide birth, says RICS Hellas spokesman George Litsas.

“I believe that this will turn off foreign investors buying any kind of real estate in Greece, local demand for property will slump and eventually, from the second semester of 2010 the property prices will decrease,” he said.

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European Property Investment on the Increase – Now is the Time to Get Back in the Saddle

Investment in European property jumped 53% in the third quarter of 2009 according to Cushman and Wakefield. Yields are also on the up across Europe. With the exception of the UK, the average yield on European property investments rose 3 basis points on the quarter – the largest quarterly rise since late 2007.

This was part of a report from Cushman and Wakefield on the rising confidence in the European real estate investment sector.

Now is certainly looking like a very good time to get back into overseas property investment in Europe, with a view to completing acquisitions into 2010. Take Germany for example:

Jones Lang la Salle are forecasting that rents on German offices will be 6% lower by the end of this year. Germany is the biggest economy in Europe, largely because of its massive export sector.

A dramatic fall in rental rates on German offices, in line with business expansion beginning to remerge, will likely spark a massive drive on business expansion in German cities; local business expansion, and foreign companies taking advantage of the situation to open offices in Germany.

This will stimulate increased demand in the residential sectors, on property to rent and property to buy. German property has often been overlooked by residential property investors, because other locations offer more spectacular yields, but German property has always been a world beater in terms of the risk/reward ration on buy to let investments,

Now that the foreign investors the world over have learned that solid rental potential that can withstand external pressures is the key to a sound property investment, German property is likely to be high on more people’s short-lists. Such a dramatic fall in office rental rates will push it even higher.

On top of that we have the fact that Germany and Italy accounted for 63% of all retail property investments in the first half of this year. Retail investment is expected to increase in the second half of the year according to analysis by CB RIchard Ellis, and Germany’s retail sector is well placed for some solid growth. This will further fuel demand in the residential sector.

Romania is another market seeing some good expansion in the commercial office sector of late. Analysis by BNP Paribas noted a major increase in sub-leasing from small business expansion. With most of the growth coming from companies involved in business consultancy, IT, private medical public institutions and Utilities, indicating expansion in those sectors within the economy. Therefore demand for residential Romanian property should see some growth in 2010.

Bulgaria sees the opening of the European Trade Centre, a five building office complex and shopping mall in Sofia, now scheduled for Spring 2010. This, again will stimulate increasing demand for Bulgarian property to rent and buy in the residential sector in the area.

Outside of Europe proper, Turkey is doing very well on the back of low interest rates and extended term mortgages. In the two months ending October, the Turkish real estate sector expanded by 2%, compared to a growth of 3% in the previous 9 months. This acceleration is thought to have been because of improving sentiment, and derestricted lending by the banks, including an increase in the term of low-rate loans from 60 months to 10 years.

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Exchange Rates Erratic, Watch the Lira for Instant Equity on Turkish Property Buys

I have just listened to a podcasted interview with Moneycorp. In the interview, David Kerns, a senior trader with the outfit spoke about the exchange rates between Sterling and the Euro, and Sterling and the Turkish Lira.

What he said on the Euro was hardly surprising. The Pound is weak against the Euro, because of the depressed UK economy that is printing money, and because the Bank of England want a weak Pound so ur companies can get a foothold overseas -- in other words they are quite happy to take advantage of the situation.

However, he did say that the Pound was going to go down to 1.05 Euros in the next month, but it has since rallied and is currently back up at 1.097. Kerns said that a fair price for a Pound is 1.15 Euros, so if the Pound does overshoot this when the UK economy recovers then it is definitely worth making then the time to buy a property in the Eurozone; to capitalise on instant equity.

It is the performance of the Turkish Lira that is the biggest surprise however. Kerns said that the Lira was going to stay strong, because its high yielding potential makes it a favourite for investment among the brave. Since then however, the Pound has climbed to be worth 2.393 Turkish Lira, up from 2.29 as Kerns spoke.

When the Lira strengthens it tends to go as far as 2.30 against the Pound, this is a kind of imaginary floor if you like, and 2.35 - 2.40 is the long term average. With that in mind anytime the Pound is worth more than 2.40, British buyers get instant equity in Turkish property purchases, and it could very well go higher than that in the coming weeks.

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Turkey and Egypt Property Markets Benefit from Strong Euro

The property markets of Egypt and Turkey are benefiting massively from the current strength of the Euro against Sterling, which is forcing Brits outside the Eurozone for their -- practically mandatory -- two weeks in the sun each year.

The main benefit that the strong Euro is having is to increase tourism growth to Egypt and Turkey, which were growing rapidly already. But this is also putting them into the spotlight as second home destinations.

The question that many overseas property investors will be asking is: what are the chances of the Euro dropping its value anytime soon. The truth is: it doesn't matter, according to the Association of British Travel Agents tourism to Egypt and Turkey from Britain has been growing at an average of 20% for the past few years. All the Euro strengthening did was accelerating this to a forecasted growth of 25% this year.

Over the long term, the Pound will never get you as much in Euros as it will in Turkish Lira or Egyptian Pound, so of all the people currently choosing Turkey or Egypt, who would normally have holidays in the Eurozone, there is more chance that they will become their destination of choice even if Sterling does regain the ground it has lost against the Euro.

Another benefit of the increased tourism from people who would normally have holidayed in the Eurozone, is that property is a lot more affordable in Turkey and Egypt than it is in Spain or the other Eurozone hotspots. So, if 10% of holidaymakers to Spain could afford a second hokme and bought there, then maybe 60% can afford to buy in Egypt and 35% can afford to buy in Turkey, and maybe 20% will buy.

At any rate the increased tourism is always going to be good for rental yields in the countries and for the economies. As economies grow property values increase automatically; the two go hand in hand. All in all the numbers of Brits buying property in Egypt and Turkey is set to increase massively in the coming months and years.

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