A strong U.S. dollar exchange rate with the Euro paired with a robust tourism industry has buoyed the European rental-investment market.
Accounting for 50% of the world’s tourist arrivals in 2018—including five of the top ten most visited locations worldwide—Europe remains a global tourism juggernaut. Paris, London, Rome, Spain’s beaches, and the Greek isles have long captivated travelers’ imaginations (and wallets), adorning glitzy magazine covers, dominating Instagram feeds, and effectively overshadowing lesser-visited but equally beautiful and rewarding competitors.
As we move into 2020 however, previously overlooked European markets are seeing soaring rental demand and challenging the conventional wisdom on investing in the previous most popular destinations in Europe.
Over 20 million annually tourists make the trip to Portugal—a remarkable quantity of visitors for a country with just north of 10 million residents. With an economy on solid footing and foreign investment and tourists pouring in, the rental market in Portugal continues to strengthen. Tourism comprises an impressive one-fifth of Portugal’s total GDP, and rental yields are around 5.5%.
Portugal has been a member of the European Union since 1986 and as part of the Schengen Zone affords visa-free travel to residents of other EU member states and vice versa.
Ease of investment. In the World Bank’s annual Doing Business survey, which measures the ease of doing business in 190 countries based on metrics like property rights, regulatory obstacles, tax burden, and more, Portugal scores in the top quartile worldwide.
Tourism. According to the United Nations World Tourism Organization, over 22 million international tourists visited Portugal in 2018, up 7.5% from the previous year. And 2018’s strong increase followed even stronger numbers from 2017, which saw a 16.5% jump in arrivals.
Property. After bottoming out in 2014, property prices in Portugal have steadily risen year-over-year. Overall, Portugal’s property prices rose by 6.1% in 2018 with rental yields averaging 5.5%. Select Portuguese cities, however, offer higher returns than the national average, including Porto and Lisbon.
Top city: Porto, Portugal
Situated on Portugal’s coast, the picturesque city of Porto is famous for its namesake delicious dessert wines, mild weather, and affordable housing at less than 60% of the cost per square meter in Lisbon. Compared to Lisbon and just about anywhere in Western Europe, housing in Porto is cheap. Prices per square meter are 400% and 600% higher in Paris and London, respectively.
As Porto cements its status as one of the country’s most popular destinations, demand for housing (prices are up over 15% in 2018) and yields are increasing.
Top city: Lisbon, Portugal
Much like Porto—its smaller, spunkier neighbor—the capital city of Lisbon has enjoyed an economic resurgence over the past several years, leading to rising home values and rental prices. Home prices were up 8% in the Lisbon metro area and rental prices by a similar 7% in 2018. Despite this, the housing market remains relatively undervalued compared to other European capital cities.
Marked by a charming and eclectic mix of medieval architecture, Moorish, Christian, and Roman influences, brightly painted melanges of homes, and an ambling historic trolley, Lisbon is a cultural repository of stunning breadth. Of the 20 million tourists who visit Portugal every year, roughly one-quarter of them—or five million—visit Lisbon, driving strong demand in the rental market.
Trailing only France, Spain is the second most visited country in the world with 82.7 million international tourists in 2018. Drawn by the great weather, rich culture, and fabulous food, Spain has long been a favorite choice for second-homes among vacationing Europeans—particularly Brits.
After enduring a long slump in the aftermath of the global 2008 financial crisis, Spanish housing prices have rebounded in recent years, beginning to edge upwards again in 2014 and continuing to do so since. Housing prices rose 4.7% in the most recent quarter
The EU’s fifth most-populous (46 million) member state and fifth-largest economy ($1.2 billion USD GDP), Spain joined the EU in 1986 and the visa-free Schengen Zone in 1995.
Ease of Investment. Spain scores highly on ease of doing business and boasts a friendly investment climate for both EU and non-EU nationals alike.
Tourism. Spain’s 82 million visitors in 2018 represent only a modest 1.1% year-over-year increase. But that appears to be a blip in otherwise rock-solid and steady tourism numbers. The 8.7% year-over-year increase in 2017 is more indicative of the tourism growth numbers in recent years.
Property. Despite the rebound in prices since 2014, prices are still recovering from their deep, prolonged slump. 2018 property prices remain 35% below their pre-financial crisis 2008 peak. Rental yields average around 4% for Spain as a whole, but certain cities offer higher returns.
Top city: Seville, Spain
Located in the Andalusia province about 50 miles from the Atlantic Ocean, Seville is Spain’s fourth most populous city and an attractive investment location. Boasting a richly diverse cultural history, including three UNESCO World Heritage Sites, an inviting Mediterranean climate, delicious local culinary scene, and relatively affordable housing prices, Seville has a lot going on.
Cheaper to invest in than Madrid or Barcelona, Seville offers higher rental yields than its better known and larger sister-cities while nonetheless matching their recently soaring property values.
Every year close to 20 million tourists visit the Netherlands. Amsterdam, the country’s largest and best-known city, is by far the most popular destination, but hardly the only draw. Enchanting, tulip-hued small towns of windmills and bicyclists have been charming visitors for years.
A chronic shortage of available housing and persistent demand in the Netherlands anchors a strong floor in the real estate and rental market. Nationally, house prices rose by 8.3% in 2018, continuing a trend of solid growth that began in 2014.
A founding EU member state and home to 17 million people, the Netherlands is the economic bloc’s sixth-largest economy ($900 billion USD GDP). The Netherlands is part of the Schengen Zone’s visa-free travel region for citizens of other EU members.
Ease of investment. The Netherlands scores highly on ease of doing business overall and about average for an EU nation. Doing business or investing in property as a non-EU citizen is straightforward, everyone speaks English, and while competition is fierce in some markets, the Dutch are famously friendly people.
Tourism. Over 19 million tourists visited the Netherlands in 2018, a healthy year-over-year increase of 6.1% coming on the heels of 2017’s even more impressive growth of 13.2%.
Property. With an estimated shortage of 263,00 housing units in 2018, up from 178,000 in 2017, housing demand—and prices—are sky-high in the Netherlands. Apartments, in particular, have enjoyed the largest gains in recent years. Nationwide, apartment prices climbed by 11.7% in 2018.
While housing prices are highest in Amsterdam, other cities in the Netherlands offer more attractive rental yields. Nationally, rental yields average around 3.7%. In Amsterdam, that number ranges from 3.7-5.3%. You’ll find the strongest yields—ranging from 5.7-6.4%—in The Hague.
Top city: The Hague
Lesser-known (but still heavily visited) than Amsterdam, The Hague is the Netherlands seat of government and home to major multinational corporations (Royal Dutch Shell, Heineken, and T-Mobile), international organizations, and NGOs (the International Court of Justice and Europol), making it a world-class city in its own right.
Life in The Hague revolves around its three lively and historic squares, which are packed with cafés, bars, restaurants, and cinemas. Also known as the home of international law, at its heart The Hague is indeed an international city. With millions of visits every year by free-spending corporate business travelers, diplomats, and global elites, The Hague is an intriguing investment location with plenty of upside.
From its inimitable cuisine to the world’s premier wine regions, to the peerless collections of art and history, France boasts an embarrassment of riches for visitors. This reality is reflected in its status as a perennial favorite destination. Indeed, tourists voted with their feet in 2018. With 89.4 million international tourist arrivals, France is the number one most-visited country in the world.
While France’s eminently reliable tourism numbers bolster demand for rentals throughout the country, it is nonetheless a challenging market for investing in rental property. Nationally, housing prices rose by a scant (compared to other EU markets) 3% in 2018 and rental yields averaged a modest 2.8%.
Home to 64 million, France is one of Europe’s most culturally, economically, and politically significant countries. A founding member of the EU and a part of the Schengen Zone, France facilitates its huge tourism industry with easy, visa-free travel to other EU citizens.
Ease of investment. France scores relatively high on ease of doing business both overall and compared to other EU states.
Tourism. The most-visited country in the world, France captures an amazing 12.6% of Europe’s total tourists. 2018’s record 89.4 million visitors represented only a 3% increase after 2017’s increase of 5.1%. Relatively slow growth in tourism numbers is attributable to capacity issues as much as anything; bursting with tourists during peak seasons, France welcomes as many visitors as it can accommodate every year, and that number can only grow so much.
Property. Despite France’s tight rental market, returns are disappointing. High-yield seeking investors should look elsewhere, for the most part. In high-end, central Parisian neighborhoods, rental yields average a respectable, if uninspiring, 4%. However, this represents some of the most expensive real estate in the world. At $12,381 per square meter in the city center, the entry barriers to the Parisian rental market are very high.
France is not just Paris, though. Other regions offer an easier market to break into for potential investors. As one of the more popular destinations—for locals and international visitors alike—Bordeaux is an interesting investment proposition.
Top city: Bordeaux, France
This mid-sized city of just over 200,000 residents in southeast France has emerged from its reputation of a sedate “sleeping-beauty” into a regional dynamo. Surging interest has made Bordeaux one of the most desirable French cities for investment. A 2017 study found more French people expressed an interest in living in Bordeaux than in any other city in the country.
Beyond the obvious main draw—the region’s fabulous wines—there are plenty of highlights for visitors to Bordeaux. Mild year-round weather, lovely museums, a UNESCO World Heritage Site, and quick easy access to Paris make Bordeaux an attractive choice for a rental property.
Like all of France’s desirable, urban real-estate markets, property and rental prices in Bordeaux are high. But even in the highest-end neighborhoods, prices max out at roughly 50% of their Parisian counterparts. This should keep prices rising and rental yields—around 3%—steady.
If you want to profit from Portugal’s tourism boom, contact us to learn more about investing in the luxurious Casa do Cativo boutique hotel.
This beautiful cash-flowing asset is located in the heart of the historical center of Porto, and it has a 9.9 out of 10 rating on Booking.com.
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