January 27, 2020
Reading time: 3 minutes
Speculation with foreign real estate always involves a number of risks. Possible currency losses, political crises or legal changes can endanger any investment. Nevertheless, there are always good opportunities that are suitable for a relatively stable return. We are looking at some regions in Europe.
Real estate in Turkey
In the years around the turn of the millennium, Turkey was considered a country with a golden future in Europe. In contrast to the EU countries, the birth rate was mostly above 2.0, so that a net population growth could be reported. From an economic point of view always an advantage. Foreign investors queued up. This development was somewhat disrupted by the financial crisis, but all in all the country was able to overcome the problems. Real estate investments were quite attractive.
Unfortunately, the political and economic situation did not develop to our advantage. Immense losses in value of the Lira, an attempted coup d'état and now wars have scared investors. For newcomers, however, the market could currently offer opportunities. Nothing is more lucrative than buying and renting property and equipment in times of a currency crisis. Should the country stabilize again over the long term and the Lira recover massively, then investors could reap gigantic profits from this effect alone, not just from regular rental income. However, politics remains the country's problem child. Investors could fear expropriation or capital freezes if further disagreements with the EU develop.
Real estate in Switzerland
In recent years, similar scenes have taken place in the Swiss Confederation as here in Germany. Prices for real estate and rents in the cities have been rising for some time now. The central bank has also introduced negative interest rates. Another lubricant for this development.
However, there are still opportunities to achieve reasonable returns in the smaller towns. Go to the online stock exchanges and compare real estate in Schaffhausen with real estate in Zurich or Bern. There are considerable differences.
For German investors, however, the rental yield plays a lesser role. Much more important is the fact that experts assume that the interest rate cannot remain negative forever. The ECB's zero could remain so for a longer period, but a long-term negative interest rate is considered extremely unlikely. If it were to fall back towards zero again at some point, the result would be gigantic appreciation of the franc, which in turn would mean massive currency gains. Another advantage is that no one in Switzerland need fear political risks.
Real estate in Eastern Europe
In Poland, Czech Republic and Hungary etc. real estate is still quite cheap. That the prices will rise is considered likely. Because the metropolises receive massive influx of rich Western Europeans and Russians. In addition, these are the places where foreign companies like to pitch their tents to settle in the EU. They accommodate numerous employees there. These are optimal conditions.
Currency gains and losses are of course always possible. However, you can protect yourself against them by renting your properties to foreigners who pay in euros. This at least ensures stable income and you retain the option of additional foreign exchange gains in the long term.