From the Ariana Grande Manchester bombing to the Brussels bombing, Europe has been overrun with terrorist incidents in the past few years. Has the real estate market been affected? Let’s take a look at the way that investors and residents in the area have responded.
The General Tone
The 2018 list of the European Cities and Regions of the Future lists London and Paris as two of its top three cities despite the recent London attack and threats of other terrorist attacks. Paris actually dropped to third, while London took the top spot. The list, curated by the FDI, Foreign direct investment, is seen as a key indicator of the health of the real estate market in the area.
There are issues year over year for major cities in Europe, however. For instance, Dublin housing completions fell to almost half of December 2017 totals in January 2018 (from 755 to 388). The average rent in the area increased to slightly over €1,500 per month. This would indicate trepidation for the area if the trend over the last 17 quarters had not moved along the same line. The rent increase represented a 5.2 pc increase year over year.
The French Recovery
In terms of the terrorist attack, France has suffered the most over the past four years (three attacks with more than 10 people killed). The French market suffered briefly after the Île-de-France attacks, which took place over an extended area. The market experienced a total recovery in 2016. Looking forward in 2018 and beyond, high end real estate is separating itself from the rest of the market with continued growth.
The third quarter of 2017 saw property price growth in Paris grow to 7.8 percent. Experts in the field predicted that it will have grown to 10 percent by the end of 2018. They also surmised that the huge increases in activity were due in part to anticipation of rising mortgage rates. Although the rate hike did not occur, total activity doubled in the early part of 2018.
At this point, Meilleurtaux reports the French base interest rate to be around its lowest historical point ever. This means lower rates for mortgages, which now stand at 1.10 percent for a 15 year mortgage. Year over year, this represents a hike of only 0.25 percent.
A report from LPI and Seloger states that prices around France are set to move up at least 4 percent in the coming year. The agencies expect the fastest moving cities to be Brest, Le Mans, Bordeaux, Lyon and Paris.
Moving Forward, Does France Represent Europe?
Parisian luxury properties are set to have the best percentage gains in Paris, around 9 percent according to Frank Knight. Knight looks at this new investment capital as a sign for the rest of Europe. Activity is up because of the recent election of Emmanuel Macron. He is seen as a staunch protector of the country as well as an international draw. It was also announced that France would not raise property taxes in 2018, another move that is sure to spark more interest domestically as well as internationally.
As the world comes back to France, it is set to come back to the rest of Europe as well. With increases of 21 percent in sales year over year in Paris, the market is actually set to explode under the right conditions.
Why do investors find the prospect of building in Europe so appealing? Especially even as the news peppers the airwaves with pictures and images of the Manchester Airport after the bombing. And also Isis and reports of how bad a mayor Sadiq Khan is for London. Simple – investors love to snap up properties at their low point. All of the negative press about Europe is drawing in long term investors who understand the difference between red light propaganda and a lasting problem.
The major cities in Europe are all set to follow in the path of France, and in particular, Paris. Real estate, especially high end real estate, is going for a discount because of reports of terrorism. Independent investors understand this is the best time to go in and make a killing.