It will come as no surprise to those who follow the worldwide real estate markets that US investors are now targeting Europe. A number of factors are now coming into play which makes the European market extremely attractive for US investors in the short, medium and longer term. Indeed such is demand for European commercial property that many experts believe this year could see a record amount of investment by US investors.
Why is Europe so attractive?
At this moment in time the European real estate market, both residential and commercial, is friendless with the European economy as a whole still struggling. The ongoing debacle of the euro is still headline news, the problems with Greece will get worse before they get better and European banks have been left with an array of unwanted property on their books. So, against this background why are US investors so keen?
For many US investors it is the perfect storm with the dollar going from strength to strength, amid signs that the federal bank will increase base rates in the short term, and the euro under extreme pressure. This has created a very appealing buying opportunity for US investors and when you also consider that the US real estate market, both residential and commercial, is seen by many as moving towards overvalued in the short term, is Europe too good an opportunity to miss?
It is highly unlikely that the euro will disappear, it is inconceivable that the European Union will collapse and while it may get worse before it gets better, perhaps we should all be looking at the long-term picture? Such has been the slump in some European real estate asset classes that they are now starting to look “too cheap” on a long-term basis. That is not to say that property prices across Europe will rebound in the short to medium term but when you also take into account the recovery potential of the euro against the dollar, perhaps this could be a long-term win-win situation for US investors?
Whether we like it or not the European Union and European Central Bank are determined to protect the wider economy in the short, medium and long term. The implementation of a €1.1 trillion quantitative easing programme has obviously caught the attention of would-be US investors as a means of stimulating growth and reducing the downside for the European economy. This will not be a short-term situation, prices and economies will not rebound overnight but this does give a very positive signal to the investment arena, the fact that the European Union and the European Central Bank are determined to protect the region at all costs.
The rise in the dollar, the overheating in some areas of the US real estate market and ongoing short to medium-term issues within Europe have for some US investors created the perfect storm. It will be interesting to see whether European real estate prices rebound in the short to medium term, on the back of overseas investment, and whether domestic sellers take this opportunity to reduce their exposure yet further.