Finding real estate to your taste is not that difficult. It is much harder to choose a specific location for investment. If in the case of districts of your hometown you can confidently rely on habit and your own experience, when investing in another country everything is much more complicated. Living next to the Eiffel Tower does not always guarantee profit, just as buying a house in the suburbs of Serbia, although it may not sound too premium, in reality, it could turn out to be an excellent idea. We suggest you take a short historical and geographical journey to better understand real estate market trends and find the most promising country of the year.
What was the first quarter of the 21st century like for the real estate market?
Let's start with a brief excursion into history. Analyzing the processes that have already taken place will allow us to predict future trends. What have the last 20 years been like for the real estate market, and what awaits it in the future?
- 2000-2008 years 🕑
It was an optimistic period of general calm. The cost per square meter in Europe gradually increased every year. Initially, prices rose by only 3%, but gradually this figure grew to as much as 7%. In order to make the cost increase less burdensome, many countries established quite lenient and generous mortgage programs. For example, in Spain, an increased sum was provided for the purchase of housing, covering not only the cost of the property, but also the transfer fees. The extra 10% added to the loan amount eased the purchasing process, especially considering that banks did not require a large down payment. Loan repayment was gradual, and monthly payments were not so burdensome for the wallet. There were exceptions to the overall positive trend. For example, after Latvia joined the EU, property prices increased by 70% in just 2-3 years.
- 2008-2014 years 🕔
The beginning of the financial crisis in the USA defined this entire period and in one way or another affected all European countries. The trend of falling prices persisted until 2014 and affected absolutely all of real estate segments
- 2014-2020 years 🕖
The situation began to stabilize gradually. Along with the revival of the economy, the former prices per square meter started to return. The annual growth rate was approximately 5%, although in countries such as the Czech Republic, Latvia, Hungary, and Estonia, it was even more rapid. Developers began to take a more responsible approach to their projects. By focusing on individual projects, it was possible to increase the pace of their construction. Banks also realized the mistakes of the past and became more selective in granting housing loans. Low interest rates attracted many investors, but were only available to the most reliable ones.
- 2020-2022 years 🕙
As soon as one thing, then another - just as the world recovered from the financial crisis, the COVID-19 pandemic began. Demand skyrocketed, so due to the lack of available options, prices also soared to unprecedented levels. In some countries, they doubled. The only ones unaffected by this trend were Italy, Greece, and Cyprus. While prices were rising, rental rates did not keep up with them. Rental income yield fell below the baseboard of the first floor apartment, which, as you understand, is quite low. Investors who wanted to quickly recover their funds through renting out the apartment had to forget about it for a while.
- 2023 and the near future 🕛
Rising real estate prices and higher interest rates have only led to a decrease in citizens' purchasing power, causing demand to drop significantly. In order to prevent the market from collapsing altogether, prices have started to gradually decrease. On average, they are decreasing by 2% per year, but in countries like Germany, the Netherlands, and Finland, they are dropping even faster. The declining trend may be beneficial for young investors. The key is to approach the choice of location wisely.
Top 5 countries for investing in 2024
1️⃣ Germany 🇩🇪
This country has become a real record holder of the century. In just one year, 2023, real estate prices here fell by 10%. The last time such a sharp drop in prices was observed was before the beginning of the 2000s! Experts believe that this trend will continue for the next six months to a year, so you should hurry to grab an apartment in Germany at an unprecedentedly low price because then the vector will sharply change its direction. The jump can occur for several reasons. First, innovations in the law on citizenship will push many immigrants to "legalize" their relationship with the host country and buy an apartment or house. Secondly, there is the problem of housing shortage. Lately, the situation is becoming increasingly acute due to the slowdown in construction pace and the significantly lower number of new properties compared to the number of people willing to purchase them. Some analysts also believe that the decrease in mortgage rates, which has already started, could also be a catalyst for price growth.
2️⃣ Greece 🇬🇷
According to the version The Economist in 2023, the Greek economy was the most efficient in the world. GDP growth, reduced unemployment, increased interest from tourists, and a stable flow of foreign investments had a positive impact on the real estate market - it began to revive from the ashes. Prices increased by 10% in a year, and in some regions by as much as 20%. But let these numbers not scare you, because even with them, the cost of 1 square meter barely managed to return to the 2008 level. The market is only taking its first steps, so in a few years, you will be able to sell the apartment you buy today for at least twice the price.
3️⃣ Spain 🇪🇸
While property prices are falling across Europe, Italy has decided to surprise everyone with the opposite trend. This can be explained by the fact that the country's economy is developing much faster. For example, while Europe's GDP expanded by 0.5% in a year, in Spain it expanded by 2.5%. Like in Greece, prices have only managed to rise to the level of 2008 so far, but this is just the beginning. "Golden visas" and simplified procedures for obtaining residency permits for digital nomads, as well as increasing local population incomes, equally strongly influence the growth of property prices and demand. The slightly slower pace of construction also plays into their hands - it is only a matter of time before a housing shortage appears and even the most modest apartment turns into a real treasure.
4️⃣ Cyprus 🇨🇾
More than 25% of real estate investments in Cyprus are made by foreigners, so the cancellation of the "Citizenship for Investment" program has made many people nervous. Contrary to expectations, prices not only did not collapse, but became more stable, and housing for people with average incomes even began to appreciate. Although citizenship cannot be bought together with square meters now, the new conditions for obtaining it also work in favor of the real estate market.
5️⃣ Serbia 🇷🇸
It started with Serbia, and it will end with it. Until recently, no one thought of this country as a promising location for real estate investment, but now it is coming out of the shadows to take a leading position in the market. Recent changes in the "Foreigners Law" have significantly simplified the conditions for obtaining citizenship and immigration, so not only ordinary people but also whole corporations have already flooded here. The government also anticipates large investments from foreigners who will come here in 2027 thanks to the World Expo. Local real estate agencies and private realtors cite the development of major cities as another factor in the imminent growth of demand. For example, in Belgrade, there is still no simple metro system, so its introduction will shake up the entire market and make even unremarkable areas prestigious in just a few days.