- Real estate investment: best countries and cities in 2021
- OPPORTUNITIES FOR REAL ESTATE INVESTMENT IN 2021
- What are the best cities for real estate investment in 2021?
- London and Los Angeles amongst best cities for real estate investment
- Which countries are the best opportunity for real estate investment and capital appreciation?
- Top cities for real estate investment in the United States
- Top US cities for real estate investment
- Real estate investment in 2021
- 5 Things to Consider Before Buying a Home Overseas
- 1. The Cost of Living
- 2. Foreign Ownership Laws
- 3. Financing
- 4. Your Tax Liability
- 5. Your Exit Strategy
- Final Word
Real estate investment: best countries and cities in 2021
Participants of the International Investor Survey also showed tax and regulatory environment concerns for real estate investment in 2021.
The main risks of this category include less certainty around municipal requirements for development, lack of knowledge and lack of transparency on local governance (fiscal and legal) and real estate markets.
In addition to this worry, there were also mentioned concerns for multifamily property, political risk at the state and local level, additional regulation and other restrictive policies that make developing and handling increasingly expensive and difficult.
The main risks related to economic slowdown that could affect real estate investments in 2021 include global coordinated economic slowdown, decelerating US Gross Domestic Product (GDP) growth, and decreased growth in some European countries.
Some of the main pricing issues that could affect real estate investment and that worry investors include:
- Late-cycle high pricing
- Compressed cap rates due to low interest rates
- High competition for assets on the equity and debt sides
Other real estate investment concerns
Besides all the aforementioned issues that real estate investors are concerned about in 2021, there are few more that are uncategorised, such as:
- Technology disruptions
- Corporate high yield debt bubble
- Lack of action to improve climate change and infrastructure investment
- Exposing investments to increasing climate risks
OPPORTUNITIES FOR REAL ESTATE INVESTMENT IN 2021
Besides the risks, this survey also identified the greatest opportunities for real estate investment in 2021.
As already mentioned in previous surveys, the growth and strength of the US market represent a constant opportunity for real estate investors in 2021, as well as low-interest rates and attractive yields.
Diversification is one of the most prominent real estate investment opportunities that resulted from the survey. In particular, scaling of the investment portfolio, the diversification to create long-term cash flow, market liquidity, and real estate quality.
Additionally, other opportunities mentioned include the exposure to sectors and opportunities uncommon in domestic markets and diversification into established and/or emerging markets
US growth and stability
As with most economies, the US has taken a battering as a result of the COVID-19 pandemic, experiencing particular struggles with unemployment. That being said, the US property market has remained relatively resilient during the time.
The Fed’s decision to keep interest rates at zero means that mortgage rates are expected to stay low for some time. As a result, the ability to secure cheap loans has fuelled demand for property within the US property market.
Simple size of the US market and greater liquidity means real estate investment opportunities are still there. Other opportunities include higher growth than European countries; better cap rates in the US and positive debt financing.
In fact, Europe has become highly costly in the face of poorer economics. Moreover, the US also has a strong relative value compared to government and high yield debt, and the yield spread over government bonds is another opportunity.
Additional opportunities related to the US growth and stability include extra return over domestic investment and positive essentials on a relative basis in comparison to other countries, such as growth and tightening vacancy figures.
US-specific strategies are opportunities that real estate investors should consider making a good investment in 2021. When talking about US-specific strategies, it is intended for the consistent growth in innovation centres across the country, the concentration of job and population growth in spite of all the regulatory risks previously mentioned.
Moreover, as hedging costs for European and Asian investors are decreasing, there are preferred opportunities in the US. Second markets are also developing strongly due to lack of new housing supply and an increasing number of households. Therefore, there are higher opportunities for overseas investors looking beyond traditional markets in the US.
Additionally, the strength in many of the residential markets, such as senior care and student housing is also an opportunity for real estate investors in 2021.
Non-US specific strategies include global urbanisation and demographic changes as well as divergent interest rate environments decoupling economies and making overseas investments more attractive.
What are the best cities for real estate investment in 2021?
Now that the main risks and opportunities of real estate investment in 2021 were outlined, it is also important to mention the actual places where it is more convenient to invest for real estate investors.
London and Los Angeles amongst best cities for real estate investment
In 2018, London was voted the number one city in the world for real estate investment, with German cities such as Berlin increasingly becoming attractive options.
However, things took a turn in 2021, with London now being number 4 in the ranking, still impressive given the historic uncertainties with Brexit.
In 2020, Los Angeles has been voted as the best city for real estate investment, moving swiftly up from 7th place in 2019. Los Angeles is often considered to be a wise choice for long term real estate investment as it consistently remains an attractive place to live and investors almost always get their money back at the very least, with most making a healthy profit.
The population of Los Angeles in 2020 is 12,447,000, whilst September 2020 showed that the median list price of Los Angeles property was USD 950K, up 5.7% compared to last year, while the median sale price was USD 850K.
Whilst LA looks to remain a wise choice for long term investments, property prices in the area are forecast to only rise by 0.7% this year as a result of COVID-19.
Other important places for real estate investment in 2021
London dropped three positions from the 2018 survey, with New York dropping to position 9 in the Global Cities category. Paris is number 2 and the best previous European city for real estate investment Berlin dropped to position 8.
London’s 2020 population stands at 9,304,000, a 1.3% increase compared to 2019. The average price for property in London stands at GBP 666,842 for November 2020. This is an increase of 3.59% since August 2020 and a rise of 5.34% compared to 12 months ago.
The population of Paris in 2020 stands at 12,278,210, with the average price of existing apartments rising by 7.95% to EUR 10,460 per square metre (sq. m.) during Q1 of 2020. In Q2 Property prices in Paris hit an average of €10,690 per square meter and are expected to climb to €10,860/m² in October.
Edward M. Casal, AFIRE’s newly elected chairman, and chief executive, global real estate, of London-based Aviva Investors, says:
“A year later, foreign investors are less concerned about the ramifications of Brexit. At the same time, the London market has been buoyed by several large sales over the last year.
London has a number of attributes as a location for investment, including a stable rule of law, transparency, and use of the English language.
In addition, a favourable time zone for international business, deep labour pool, and cultural attributes also help.”
Which countries are the best opportunity for real estate investment and capital appreciation?
In 2018, the International Investor Survey announced the top five countries providing the best opportunity for capital appreciation. These were:
The US also continues to lead the world in terms of offering the best opportunity for capital appreciation, followed by Brazil, remaining in second place.
China and Spain both moved up from a sixth-place tie last year, taking third and fourth places respectively. The UK fell from third to fifth place.
Most Stable and Secure Countries for Real Estate Investment
Here is the list of most stable and secure countries for real estate
With 58% of respondents’ votes, the US remains the country considered the most stable for real estate investment. Germany again took second place with 20% of the votes, and Canada remained in third place with 12%. The UK moved into fourth from fifth, while Australia fell from fourth to fifth.
Top Emerging Countries for real estate investment
AFIRE also provided an overview of best emerging markets for investors. Brazil regained its foothold as the number one emerging market, moving up from third place to replace China, which fell to second place. India moved into third place from fourth, Mexico fell from second place to a tie for third with India, and Colombia entered the list of top five emerging markets in fifth place.
Here is the ranking of best emerging countries for real estate investment:
Top cities for real estate investment in the United States
Eighty-six per cent of respondents say they plan to maintain or increase their investment in US real estate. Mr Casal says:
“Significantly, San Francisco, which has been on investors’ top five global cities list since 2011, fell into 11th place, and Washington, D.C. continued its slide among global cities, falling from 15th place last year to 25th this year.”
Top US cities for real estate investment
New York used to be named the top US city for the last years, holding a substantial lead over Los Angeles. But things turned around in 2020, where Los Angeles topped the charts for the best global city to make real estate investments. Here is the ranking
Nonetheless, by a substantial margin, the US was ranked as the number one country for planned real estate investment in 2018 followed by the UK, Germany, Canada, and France.
Survey respondents also cited several strengths of the US market including the United States’ strong, stable economy, transparent capital markets, and reputation for innovation.
As alternative asset classes, they pointed to senior housing, infrastructure, medical office buildings, and student housing.
Real estate investment in 2021
It will be very interesting to see how the results for the 2021 real estate investment survey differ to this year.
With the plight of the COVID-19 pandemic still ongoing, undoubtedly there will be some dramatic changes within particular countries.
That being said, cities such as Los Angeles, Paris and London have all seen demand continue this year despite the virus.
For the UK, the end of the Brexit transition period will also ly affect investor sentiment going forward.
This was an overview of the best places, cities, risks and opportunities to consider for real estate investment in 2021.
If you are a property investor and are looking to make an overseas real estate investment, we can give you expert and tailored guidance to make sure you get the most the currency conversion. Feel free to give us a call or fill in the form below.
5 Things to Consider Before Buying a Home Overseas
There are lots of reasons why you might consider buying a home overseas. Perhaps you’ve found the ultimate vacation spot and you want a permanent place to park your stuff.
Or maybe the idea of spending your golden years someplace warm and sunny appeals to you. Either way, buying property in a foreign country is going to be a different experience than buying a place on your home turf.
Before you fall in love with that Italian villa or a Mexican hacienda, here are five things to take into account.
Find out now: How much house can I afford?
1. The Cost of Living
Moving overseas can benefit your bottom line if you pick an area that has a low cost of living. On the flip side, if you want to buy a home in a location where necessities food, transportation and medical care are much more expensive than they are in your current city, moving abroad might not make sense.
As you’re scouting out properties, it’s a good idea to learn more about how the cost of living in those areas compares to what you’re currently paying. That way, you can plan ahead and budget accordingly.
2. Foreign Ownership Laws
Individual countries have the right to place restrictions on non-citizens who want to own properties. Even if the country you’re interested in allows foreigners to buy homes, you may be required to obtain special residence permits or register with a government agency before you can complete a home purchase.
If you don’t know what a particular country’s rules are, you can always contact a real estate attorney who knows how to execute foreign transactions. After all, you don’t want to find out that you can’t legally own a home abroad after you’ve already moved in.
Related Article: Do You Need a Real Estate Lawyer?
One of the trickiest aspects of buying a home overseas is figuring out the financing.
If you’re planning to go through a foreign bank to get a mortgage, be prepared to shell out a big down payment and potentially pay a high interest rate.
You may even be required to purchase a separate life insurance policy so that your mortgage can be paid off in the event that something happens to you.
If you don’t want to deal with financing a home purchase overseas, you could consider using cash to pay for your house. You could use a home equity line of credit as your source of cash. But then you’d be putting your primary residence on the line if you can’t make the payments.
If you need fast cash, you could also consider tapping into your self-directed IRA. But you wouldn’t be able to live in your new home. So unless you’re satisfied with using the house you’re buying abroad as an investment property, you’ll probably have to look into other options.
4. Your Tax Liability
Before moving into a foreign country, it’s best to consider any tax rules that might apply. It’s not uncommon to be charged taxes when you buy a home and again when you sell it. There may also be ongoing tax payments that you’ll need to make throughout the year, similar to U.S. property taxes.
Bottom line: Before you commit to buying a house overseas, you’ll need to know how it’ll affect your tax situation.
Check out our federal income tax calculator.
5. Your Exit Strategy
Buying a vacation home or a retirement home abroad may seem a dream come true until you’re ready to unload it. In certain countries, homes can stay on the market for months or even years. Factoring in local market conditions as you develop your exit strategy can ensure that you don’t get stuck with a house long after you’re ready to move on.
Before buying a home overseas, it’s important to be aware of your legal rights and obligations. Putting together a home buying team that includes a real estate attorney, a real estate agent and a mortgage lender who are familiar with the ins and outs of foreign real estate purchases can help the process go more smoothly.
You should also be sure you fully understand how this investment fits in with your larger financial plan and will impact your budget, both of which a financial advisor can offer guidance on. A matching tool SmartAsset’s SmartAdvisor can help you find a person to work with to meet your needs.
First you’ll answer a series of questions about your situation and goals. Then the program will narrow down your options from thousands of advisors to three fiduciaries who suit your needs. You can then read their profiles to learn more about them, interview them on the phone or in person and choose who to work with in the future.
This allows you to find a good fit while the program does much of the hard work for you.
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