What Types Of Properties In Europe Should Investors Consider For Better Returns
A major trend in the European housing market is buyers seeking out smaller houses. They no longer choose to acquire grand villas after all, these are expensive to buy and maintain. The elderly in particular are the ones with money, but they often cant cope with maintaining huge houses. Younger people, on the other hand, dont have the money but arent willing to spend time maintaining large properties. Therefore, we see the luxury segment has more vacancies and large villas dominate the market.
Instead, senior citizens would rather sell their houses and reinvest in smaller luxury apartments with a view. They are willing to put a lot of money in a five-star apartment without too much work.
Nowadays, many young people have to rely on their parents generosity to be able to afford property. That said, it gives a better return than putting money into the bank they will get little return since interest rates are around zero. If parents want to help their children, they might consider investing in smaller, more affordable housing.
This is not only a financial trend, but a social one. Property developers and investors should therefore consider houses and apartments of a medium size or smaller. They should also look into properties that are energy-efficient, which is obviously big business almost anywhere in the world.
The Housing Market Is Changing Quickly
The housing market is moving quickly in response to inflation, rising interest rates, and a shaky economy. Both buyers and sellers are thinking twice as sellers scramble to catch the top, and buyers are starting to call the bluff.
Some markets are already experiencing strong declines in demand, while other metropolitan areas are holding strong due to solid demand and reasonable pricing. Keep reading to learn five places where you can safely buy and five you should avoid at all costs right now.
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Cme Group: Benefiting From Rising Rates
CME Group is the parent company of the Chicago Mercantile Exchange, the Chicago Board of Trade, the New York Mercantile Exchange, and several other exchanges. It operates the biggest derivatives exchange in the United States.
Its share price had been depressed during the first couple of years of the pandemic because benchmark interest rates were stuck at zero, which put a damper on trading in interest rate derivatives. But with the Federal Reserve raising the federal funds rate, average daily volumes in interest rates products have been rebounding — they’re up 24% over the past year. Volumes for equity index products have risen even more.
CME has a dominant position in its chosen markets, and it would be difficult for any competitor to dent its business model. At current share price levels, CME Group has a dividend yield of 1.94%.
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Why Are Real Estate Investors Still Flocking To Europe
Just a few years ago, everyone was predicting the end of Europe, especially the end of continental Europe. But we have still seen ever-increasing property prices as investors flock to the markets Berlin, Lisbon, Dublin, Rotterdam, and Zagreb are among the European cities experiencing high levels of growth. This is good news for wealthy investors, but brings challenges for those less well-off and first-time buyers.
Indeed, real estate markets in Europe, whether commercial or residential, are actually very expensive. Yet the continent, with its modest economic growth and low inflation rates continues to attract global investors.
The reason for this is all linked to the monetary policy of the European Central Bank , and it has nothing to do with real estate. The ECB has a loose monetary policy of keeping interest rates artificially low in October 2021, it decided to keep them unchanged at 0.00%, 0.25% and -0.50% for as long as necessary. Investors, therefore, dont see any other possibility than investing in real estate. Buying stocks can be too risky as they are volatile, and bonds are expensive considering yields are still hovering around very low levels.
Best Places To Invest In Real Estate
We will look at some of the best places to invest in real estate in 2022 in this article. Real estate remains an appealing asset class for investors because of the opportunity to earn recurrent income from rentals. If market conditions are favorable, your monthly rental income can fully offset the costs of mortgage servicing. Interest rates remain low, so debt remains affordable. Record-low mortgage rates and a scarcity of available inventory kept the US housing market strong in terms of buyer demand in the past two years. The strong housing demand is still driving prices insane despite the higher mortgage rates in 2022.
The US housing market remains a hot seller’s real estate market, with annual price growth reaching record highs and inventory continuing to fall. Because it’s a seller’s market, expect a bidding war if you’re looking for a new house in 2022. If you are an investor, you must crunch the numbers to determine the best cities to invest in real estate in 2022. During the pandemic, prospective homebuyers around the United States are paying top dollar for homes, with remote employees and their desire for more lavish homes fueling the market.
Affordability challenges will keep prices from advancing at the same pace we saw in 2021 even as ongoing supply-demand dynamics mean prices continue to grow nationwide. Zillows home value forecast expects annual home value growth to begin a gradual cooldown late this spring. It forecasts 14.9% growth over the next 12 months.
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Why Invest In Real Estate
Real estate can enhance the risk-and-return profile of an investors portfolio, offering competitive risk-adjusted returns. In general, the real estate market is one of low volatility, especially compared to equities and bonds.
Real estate is also attractive when compared with more traditional sources of income return. This asset class typically trades at a yield premium to U.S. Treasuries and is especially attractive in an environment where Treasury rates are low.
Best #: Springfield Massachusetts
Not quite as hot as Fresno but still a standout for the eastern seaboard, Springfield is experiencing increased demand and a balance of supply. This has resulted in a 17.4% increase in price, which is nothing astronomical in today’s wild housing markets.
As the third-largest city in Massachusetts, it offers affordable city living without the sky-high housing prices of Boston or other major metros in the northeast.
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Heat Map: Fastest Appreciating Counties
Cities are all well and good, but I like the depth that county-level data provides.
Heres how real estate performed in every county in the US over the last year:
Some counties saw year-over-year home price increases of more than 50%!
One trend we witnessed in 2020 and 2021 was an acceleration of the de-urbanization trend, particularly in the largest, most expensive cities. But in many cases, residents simply moved out to the suburbs surrounding the same city, and therefore stayed in the same county.
We also keep an eye on nationwide migration trends, particularly the extent to which Americans are leaving high-tax states in favor of lower-tax states. But these migration trends cant perfectly explain the hottest real estate markets in 2020-2022.
Take New Jersey, one of the states with the highest taxes and greatest outbound migration. Every county in South Jersey saw year-over-year home price growth of over 10%!
Or Vermont, with its high inbound migration. Sure, it saw strong appreciation by historical standards, but nowhere near what youd expect.
Note: The gray counties didnt have sufficient MLS sales data for Zillow to provide median home values.
Real Estate Trends & Predictions For 2022
Many experts are eyeing the real estate industry to see what will happen in the year ahead. A brief review of previous years might suggest that while predictions can be useful in planning, they are not entirely accurate. For example, at the start of 2020 many would never have guessed the biggest driving factor in the market would be the COVID-19 pandemic. As we head into 2022, the effects of the pandemic continue to drive several changing trends in real estate including an emphasis on e-commerce, upgraded rental properties, and inventory shortages.
Real estate investors should keep an eye on the return to retail spaces. While the conversation around e-commerce has continued to suggest an end to brick-and-mortar stores, this is simply not the case. Many individuals, in light of eased COVID-19 restrictions, still want to attend restaurants, shop, and spend time in commercial retail spaces. With the exception of possible vaccine and mask mandates, many commercial areas are open for business as usual and investors should expect that trend to continue.
2022 is expected to be an interesting year for real estate market trends. Investors should keep an eye on both residential and commercial trends to stay informed about the year ahead. For those looking for new markets to watch, here are the top 10 markets to pay attention to in the year ahead:
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You Start To Think Worst
Due to leverage, a 10% decline in the value of your home is a 50% decline in your 20% downpayment. Once the momentum to sell begins in real estate, it starts getting scary, especially if you own a condo in a large building. Think about real estate as a super tanker thats hard to stop in either direction.
During a worst case scenario, you start calculating how long you can keep the house before you run out of savings if you lose your job. You also calculate how low the house can go before it no longer makes sense to keep paying the mortgage.
During the worst stage of a correction, you may really begin to freak out because you will know friends who have been laid off. You start wondering whether youll be next. You cannot help but worry about the housing market ruining your life, especially if youre over 40.
During the Global Financial Crisis my company went through seven rounds of layoffs. My best friend at the time lost his job and just had his first son. I did my best to get my firm to hire him, but it didnt work out. Although I didnt have kids at the time, I did have a $1.1+ million mortgage on my primary residence.
The State Of Jacksonvilles Rental Market
Jacksonville has one of the countrys highest-performing economies, and its low unemployment rate is a testament to the strength of the job market.
Florida was quicker to loosen COVID-19 restrictions, which allowed businesses to return to full operating status and allowed the areas popular tourist attractions to resume pre-pandemic norms, which helped fuel economic recovery for cities across the state including Jacksonville.
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Real Estate Trends & Predictions For 2019
Released jointly by the Urban Land Institute and PwC, the annual Emerging Trends In Real Estate report highlighted a theme of unpredictability for 2019. Researchers stated that simply connecting the dots will no longer work and that this will be a new era that will demand new thinking.
The report also posited that 2019 would lend itself to overlapping trends, with the intersectionalities themselves leading to new conditions. For example, researchers postulated whether or not the technology used to improve productivity and efficiency would accelerate the industrys downsizing. Investors were advised to prepare to be surprised in any way possible, which was great for spurring innovation and creativity within the industry.
The following covers the top commercial real estate trends and predictions for 2019, as well as a review of the trends in preceding years. Federal officials have hinted that they will continue boosting interest rates to moderate inflation and stabilize the economy. The Federal Reserve hiked rates three times in 2018, between 2 and 2.25 percent. According to Curbed, the slowdown of economic growth will impact the real estate sector, especially in emerging markets. As real estate activity slows, investors will have a tougher time identifying new deals.
Best Markets For Real Estate Investing: Airbnb Rentals
As profitable an investment as a traditional rental is, owning an Airbnb business could give you greater earning potential. This is why a lot of folks who go into real estate investing prefer to own vacation rentals.
As a vacation rental owner, you can earn up to three times what most landlords earn. However, it will still depend on how you manage your business and, of course, the market youâre in. Even if you have the best property your money can buy, if your location doesnât have much to offer by way of Airbnb earnings, youâll probably struggle to break even.
To get the best out of your real estate investment, you must look for markets that offer the best numbers in the following categories:
- Median Property Price. The best rental markets with lower median prices offer faster and greater returns on your investment.
- Airbnb Rental Income. Monthly rental income will vary depending on several factors like seasonality and geographic location. Find out all you can about a particular real estate market first before you make your decision.
- Airbnb Cash on Cash Return.Cash on cash return takes into account financing since not all real estate investors have the capacity for all-cash transactions.
- Airbnb Occupancy Rate. Occupancy rates, like rental income, vary per real estate market. Be sure to check out the real estate and rental comps in the area to see how well similar rental properties are performing.
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What Kinds Of Returns Can European Real Estate Investors Expect
In the core markets of Europe, returns are expected to be positive but on the low side. You may not make 1015% a year, but you might have a cash return of a few percent a year. In reality, the focus of investors should be on cash, not on capital gains, because core residential markets are already expensive.
The commercial market is similar: either you buy in the established office and retail markets, and expect a cash return of around 46% with limited capital gains, or you buy in recovering markets. This might include southern and central Europe, perhaps Ireland and Central Europe, and the more regional cities in European countries. The returns could be higher though, but with much higher risks.
The euro is currently fairly stable, 1.19 against the pound and 0.89 against the dollar as of October 2021. European real estate is in extremely high demand, and its an interesting asset class. Still, investors should not overestimate their return expectations.
When Investing It Usually Pays To Focus On Market Leaders
When building out a stock portfolio, it can help to start out by focusing on companies that dominate their respective industries. You can make that search a bit easier by focusing on industries where there are high barriers to entry, as the companies operating there tend to become premium providers that can help an investor maintain their portfolio’s margins.
Today we are going to look at four companies that dominate their industries . Most of them are real estate investment trusts which usually deliver decent yields as well.
Image source: Getty Images.
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Use Real Estate Investment Software
One of the biggest challenges of flipping homes or finding rental properties in Michigan is finding great deals, as it’s a strong seller’s market with limited inventory.
Real estate software or apps can help you find deals. Popular real estate software or websites for investors to consider include:
DealMachine: DealMachine’s app helps Michigan investors find and research distressed homes , and get in touch with owners fast via batch skip tracing and direct mail campaigns.
Its driving for dollars app is fast and easy to use. When you’re driving around town and spot a home that looks like it could be a great deal, pull up the DealMachine app to get the owner’s contact info. or send the owner direct mail .
to find undervalued Michigan properties as you drive, and read our DealMachine review for more information.
The company offers a 7-day free trial and $15 in free credits that can be used towards marketing .
Flipster: Primarily targeting house flippers, this app helps user find motivated seller leads, while also providing valuable comparable property information to help you estimate a home’s fair market value before making an offer.
Flipperforce: The Flipperforce app helps BRRRR method investors analyze home values to calculate the maximum purchase price to offer on a property before making a purchase.
Best Rental Markets In 2021
The best rental markets in 2021 were largely the product of new indicators created by the pandemic. In particular, work-from-home trends enabled more people to trade expensive primary cities for more affordable secondary cities. While rental trends were strong in just about every city because of a lack of available inventory, smaller cities saw the most attention. In fact, cities adjacent to some of the most expensive cities to live in saw exponential increases in rental demand and prices. Lets take a look at the cities that had a thriving rental market throughout 2021:
- Atlanta, Georgia
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