The situation in Japan and the Middle East may lead to higher property prices in Europe

Recommendation points

• Asian Investors Swap Japan for Europe
• Instability in the Middle East increases investor interest in Europe
• Let’s sum up

A magnitude 9 earthquake off the northeastern coast of Japan on March 11 was devastating. The following figures indicate the scale of the tragedy: more than 10 thousand dead and more than 13 thousand missing.

Hamada Yoshi. Bomb victims at Kokuzenji temple.

After the earthquake, there were serious explosions at the Fukushima-1 nuclear power plant, leading to a radiation leak. The situation in the country is still tense. The attention of the entire world community is riveted to it. A catastrophe of this magnitude cannot pass without a trace. It will certainly have an impact on the economy of both Japan itself and the world economic situation in general. According to some experts, this situation will affect the real estate market. In addition to the Japanese tragedy, the situation in the Middle East will also affect the global real estate market..

Asian Investors Swap Japan for Europe

The earthquake and the subsequent accident at the Fukushima-1 nuclear power plant dealt a serious blow to the Japanese economy, which will entail a lot of problems: the collapse of stock exchanges, bankruptcy of many enterprises, unemployment. According to experts, in this situation, property prices in Japan may collapse. According to forecasts, a fall in prices may reach 10-15%, as a result, investors from Asia will look for new markets.

According to Igor Indriksons, director of the overseas property investment department at IntermarkSavills, over the past 20 years, Japan has been in a negative growth zone, and a lot of speculation has been made on the Japanese real estate market lately. However, when the country had already achieved positive changes and had to overcome the consequences of the global economic crisis, this terrible tragedy occurred..

The most likely scenario for further developments is that the disaster in Japan could cause a sharp jump in prices for European real estate.

The expert also confirms that the real estate market in Japan will not avoid a price hike. And in the future, this situation will inevitably lead to changes in the global real estate market..

According to the expert, the most likely scenario for further developments is that the disaster in Japan could cause a sharp jump in prices for European real estate. The fact is that earlier investors from Asia gave preference to buying real estate in Singapore and Hong Kong, but in recent years, price increases here literally went off scale, ranging from 20% to 40% per year..

As a result, by the end of 2010, Japan had become the most attractive and promising investment site for Asian investors. At the end of 2010, Asian investors purchased real estate in Japan for a total of $ 372 million. Properties in the center of the Japanese capital brought in fairly good net yields ranging from 4.5% to 5.5%. This is despite the fact that similar properties in Singapore and Hong Kong are only 3%.

Now, according to analysts, these investors may come to Europe. Europe, unlike the Asian market, remains quite stable, both in terms of the dynamics of property prices and in terms of earthquake protection.

For example, earlier experts from Savills predicted that due to the growth of the world economy in the period from 2011 to 2013 by 12.1% and especially significant growth rates in China and India, investors from these countries will come to the British real estate market. Until now, investors from Eastern Europe and the Middle East have mainly invested in real estate in the London market..

Kevin Connor. Winter Sky, Shaftesbury Avenue, London. 1932

However, experts do not deny that Japanese investors themselves in this situation, in order to help their economy recover after the catastrophe, will take their funds from European markets, in which they had previously actively invested. Japanese investors currently hold assets outside their home country, which are valued at $ 11.8 billion..

Instability in the Middle East increases investor interest in Europe

The increased activity of many investors in Europe is also associated with instability in the Middle East and North Africa. Against the backdrop of armed conflicts and revolutions in Libya, Tunisia, Egypt, Bahrain and some other countries, investors are redirecting their assets to European countries to preserve their capital.

IntermarkSavills analysts have even compiled a rating of the most risky countries for purchasing real estate, the list includes: Egypt, Tunisia, Bulgaria, Thailand, Uruguay and some other exotic countries. Unreliable markets also include the countries of the Middle East, North Africa and Greece..

Wassily Kandinsky. Arabs (Cemetery). 1909

However, as some experts note, the situation on foreign real estate markets may change dramatically soon. The thing is that now there are massive resettlements of refugees who come in huge numbers to Europe from problem regions. Penny Lane Realty notes that immigrants from Libya, Algeria, Egypt, Morocco and Tunisia are moving to France, Kurds and Turks to Germany. The influx of refugees to Europe will affect the dynamics of prices for European real estate, analysts suggest a decrease in prices in the market of countries to which refugees are massively resettled.

Nevertheless, according to some experts, it is profitable to invest in real estate in the Czech Republic and Bulgaria, where you can buy furnished apartments at prices ranging from 10 to 20 thousand euros. Wealthier buyers can buy property in Spain. Here the cost of housing is from 40 thousand euros.

Let’s sum up

Recent world events have seriously affected the state of the world economy. It’s not just energy prices that are rising. Many investors are looking for an alternative to investing their funds. Japan and the Middle East have lost their former appeal.

Investment in Eastern Europe and Latin America is projected to grow by over 40%.

Potential investors can only redirect their capital to real estate in other countries with a more favorable situation, including Europe. And the inflow of capital will necessarily entail leaps in prices for housing and other real estate.

According to the forecasts of experts of the Crushman company & Wakefield, global real estate investment in 2011 will grow by 5-10% and amount to about $ 606 billion. The leading positions in capital inflow into real estate will be occupied by the countries of North America and developing countries. Investments in Eastern Europe and Latin America are projected to grow by over 40%. This is due to the fact that modern investors assess their risks and prefer to invest in stable markets that are relatively protected from surprises..