International property buyers looking for «safe havens»

The world underwent profound changes in 2015 that simultaneously quashed and stimulated spending abroad. The steep drop in oil prices and weak commodity trading has brought on a spate of currency devaluations, particularly China and Russia.

Geopolitical global trends emerge

In the face of falling domestic currencies, foreign investors are targeting commercial property in stable markets to protect their capital. Investors with USD and GBP have gained purchasing power in Eurozone countries. In Q1 2015, Eurozone property searches originating in the UK grew by 37% year-on-year.

Spain’s long awaited real estate recovery is one headline event of 2015. Property prices grew by 2.8% and experts forecast further improvement for the next 2–3 years.

-> Another 2–3 years expected growth for Spanish real estate

British buyers made their way back in droves to Europe this year thanks to the UK’s strengthening economy, growing wages and a strong pound. They are now, once again, the leading foreign buyer segment on the market according to rightmove.co.uk

External stimulus came from the EU’s cheap credit and terrorism against European holidaymakers further abroad, which in turn has brought people back to safer shores. Overseas buyers in Spain made up 31% of total investments during H1 2015 and prices finally climbed out of their seven-year plunge in 2015.

350 Europeans were killed in November alone in a spate of ISIS attacks in Paris and the bombing of a Russian plane over Egypt. The EU’s failure to contain mass immigration has increased local fears of terrorism but, moreover, heightened pressure on national real estate markets and local authorities.

-> Germany needs 50% more homes to house migrants

Over 1 million migrants arrived into Europe in 2015, most heading to Germany, which now needs 50% more homes to house migrants. In the meantime, some local authorities have even re-appropriated empty commercial property for asylum seekers.

Hunt for “safe havens”

Deflation and recession are key words as the year comes to a close. China’s growth continues to slow and Russia’s economy has been dragged down by the simultaneous effect of plummeting oil prices, heightened military activity and tit-for-tat sanctions.

Chinese have taken over from the Russian-speaking buyers as the most noticeable, affluent and aggressive buyers on global markets while foreign property transactions from the ex-Soviet Union were halved according to data from the Central Bank of the Russian Federation.

-> Chinese billionaires take over New York prime property market

Capital from China has moved steadily into hot urban markets in the United States and the UK. This year, they replaced Canadians as top buyers of U.S. property after their investors spent just under $30 billion over a one-year period that ended in March 2015, as reported by the Wall Street Journal.

However, hunt for “safe havens” knows no borders and yuan investors have branched out from US, UK, Canada and Australian markets, into Italy, Greece, the Netherlands and other EU member states. In fact, investments in Spain increased almost five times during 2015 according to Juwai.com.

The recession in Russia and easier access to mortgages has heightened interest in commercial property. Residential property interest has dried up and buyers are hurrying to hedge their capital in Europe, routinely choosing the most expensive property abroad according to the upcoming Russian and CIS Buyer Activity Report 2015 by Tranio.

The Golden Visa club

In 2015, there were 14.6 million High-Net-Worth-Individuals globally and over fifty “Golden Visa” programmes worldwide.

-> The Golden Visa Club: profile of the world's most affluent buyers

These investment-based residence permits are designed to appeal the world’s elite, particularly from emerging markets, offering them access to property, stable financial systems and attractive education systems for their children. The most common investment vehicle is prime residential property.

So while 2015 has seen international middle class buyers exit foreign markets due to currency volatility, super-affluent investors (e.g., over $30 million in assets) are becoming more prominent both in terms of real estate purchases and media attention.