House prices grew by 3.8 percent on average in the European Union last year, and construction volume also increased, by 0.8 percent. These positive figures show that European residential property is now truly on its way to recovery.
The recovery stage of any property market cycle is the most favourable time to buy a new home, as prices have reached their lowest point and are just starting to grow again. This is also beneficial to people who are selling or looking to rent out their home because demand is increasing.
For foreign investors, the most promising of them are Bulgaria, Hungary, Spain, Cyprus and Portugal.
After seven years of recession, the Bulgarian property market has stabilised and finally, prices grew by 4 percent in Q4 2015 compared with the same period in 2014. The recovery is most noticeable in Burgas (pictured), Plovdiv, Varna and Sofia. At the same time house prices in Bulgaria are still among the lowest in Europe, running at between € 600 to € 1,000 per sqm for apartments and € 100 to €1,000 for homes last year.
The property market in Hungary proved itself to be more resilient than some of its Mediterranean peers following the 2008 crisis, and actually did better than Spain between 2009 and 2010. The local market entered recovery three years ago, but this trend only recently consolidated itself. By Q4 2015, prices for homes had grown by 10.2 percent year-on-year, and the most popular destinations were Budapest, Lake Balaton and the surrounding resort towns of Héviz and Keszthely. In 2015, apartments cost between € 600 and € 1,400 per sqm on average, and between 1,000 and €2,500 for houses.
Prior to 2007−2008, the Spanish property market was among the “hottest” in Europe, but the crisis brought dire results for house prices until just last year. However, the market finally regained its footing and prices rose by 4.3 percent in Q4 2015 year-on-year according to Eurostat. The most promising regional markets are the autonomous communities of Andalusia, Valencia, Catalonia, Madrid and the Canary Islands (Las Islas Canarias). These regions also attracted 70 percent of all foreign buyers last year. The average price per sqm was € 1,619 by December 2015, with flats ranging from € 1,000 to € 3,000 and houses selling for between € 1,200 and €3,000 per sqm.
Price growth for residential property in Cyprus is still struggling to maintain momentum and dipped into negative waters (–0.2 percent) in Q4 2015 year-on-year. The most promising local destinations are Limassol, Paphos and Larnaca. Apartments on the island cost between € 2,000 and € 2,500 per sqm and beween € 2,400 and € 2,900 for houses.
The Portuguese property market is entering the expansion stage and prices grew by 5 percent between Q4 2014 and Q4 2015. The most popular markets with investors are Lisbon and the Algarve, a southern holiday resort. The average price per sqm for apartments ranges from € 800 to € 3,800 and from € 650 to € 3,500 for homes.
And other European countries?
If the above countries are leaning towards consolidation and growth, the situation is not as clear-cut on other property markets. In Belgium, the U.K., Denmark and Sweden, home prices have gone through the roof, exceeding pre-crisis levels already long ago. In fact, a study by the OECD shows that these locations are overvalued and economists in Sweden have been raising the alarm since last year over the extreme risk of an imminent collapse.
On the other hand, countries like Italy, Latvia, France and Croatia are still struggling to achieve nationwide growth and property transactions often just benefit a few regions. This means that residential property in these countries is either still too expensive or simply not very popular.
Research from real estate website Tranio showed that it’s better to hold off on buying property in these countries until prices stabilise and begin to show reliable growth. What happens in Greece, an exception among the European property markets, will largely depend on how the government handles the geopolitical situation and economic growth over the next year.
This column was written by Ivan Chepizhko of Tranio.