Real estate markets can change in a heartbeat, but it’s important to seek out promising markets, nonetheless. And while the recent housing collapse forced many American investors to make overseas investments, many are still dabbling in international investments, despite the domestic market’s steady recovery. But which domestic and international locations are offering the most lucrative opportunities? The cities, countries, and locations leading the charge may surprise you.
San Francisco and Oakland, California
It’s the worst kept secret in real estate, but no market is hotter than San Francisco. It recently surpassed Manhattan as the priciest rental market in the entire country. In fact, the median rent for a two bedroom apartment in San Francisco is more than double that of other major U.S. cities like Los Angeles, Miami, Chicago, Seattle, San Diego, Denver, Philadelphia, Atlanta, Houston, and Dallas.
The steep increase in real estate prices is fueled by the influx of wealth from Silicon Valley startups and successful local industries. However, it’s not just San Francisco that’s seeing tremendous growth. While Oakland has long had a poor image when compared to its appealing counterpart across the Bay, statistics show that it’s actually seen higher growth than any other city in the country this year.
Specifically, rent rates in Oakland have surged 20 percent over the past 12 months. The median rent for a one bedroom apartment is now $1,980 – more than Chicago, Miami, Los Angeles, and Seattle. Despite this, Oakland still remains the most affordable location to live in the Bay Area. As a result, real estate investors are gobbling up vacant properties and preparing for an impending boom.
Far away from the shadows of the Golden Gate Bridge, Bangalore, India is experiencing tremendous growth. When compared to other metropolitan cities in the region, Bangalore has managed to set itself apart by placing an emphasis on sustainable growth and long-term value. In and around the city, the number of manufacturing hubs has ballooned to new heights – bringing more people to the city for higher paying jobs.
Public transportation has also improved, with 6 out of 9 Namma Metro lines now servicing parts of the city. As a result, the city has experienced a sort of IT boom, which has led to lucrative employment opportunities with a number of startups and established companies. All of these combined factors have led to higher property values in Bangalore and the surrounding areas. Currently, the best investment opportunities in the city are found in Hebbal, Narasapura, Indira Nagar, Whitefield, Hennur, and Yelahanka.
One of the more surprising names on this list is Iceland. Not typically thought of as a big real estate empire, the capital city, Reykjavik, is currently experiencing a major upswing. In 2008, Iceland was hit hard by the United States financial crisis. Inflation was almost 20 percent a year, but has since been brought back to only five or six percent. This, combined with a massive tourism boom over the past 24 months has lead to an increased demand for homes and residential dwellings.
“Iceland is a very young country; half of the population is under 34 years old,” said Asgeir Jonsson, former chief economist at Kaupthing Bank. “It is also growing fast. Reykjavik’s population grows by something like 20 percent every year.”
Another reason so many investors are considering Iceland is that the buying process is simple and friendly. European investors are flocking towards Iceland because there are no restrictions from the EU regarding when and how much property you can buy. Additionally, buying taxes are only 0.8 percent the property’s value and owners can sell after two years without having to pay capital gains taxes.
The future of Iceland is anything but certain, though. “The market in Iceland has always been very violent,” Jonsson said. “There is always a boom and a bust. The only question is timing.”
When you look at Ireland as a whole, you see an incredibly hot market. The year-over-year growth rate for home prices is 17.56 percent, up from an already healthy 7.49 percent in 2014. The growth is a result of the economies recent surge. In fact, the Irish economy is the fastest growing in the entire EU, with GDGP growth of nearly 5 percent last year. The economy is expected to grow another 3.9 percent this year, followed by 3.3 percent in 2016.
Dublin is arguably the top market in Ireland, with forecasts calling for strong rental growth this year. “There has been heightened interest in Dublin as a property investment centre, particularly from foreign investors,” says Enda Faughnan, a member of the PwC Ireland real estate team. “There is still a lot of supply to come onto the market which will appeal to a wide range of buyers.”
Other hot European investment markets include Berlin, Madrid, and Hamburg.
Making the Smart Investment
International real estate investments are rarely straightforward or simple. While the aforementioned markets offer potentially lucrative returns to investors, every investment should be viewed through a lens of caution. It’s best to develop relationships with local real estate professionals in each individual market you’re interested in. This personal insight will allow you to more accurately gauge the profitability of an opportunity on the ground level.
However, you also shouldn’t be pushed away from making an international real estate investment simply because it’s outside of the U.S. By expanding your horizons and willingly pursuing foreign opportunities, you can diversify your portfolio and maintain better balance.
At the same time, you should maintain a healthy percentage of domestic investments. The U.S. real estate market – as a whole – is expected to experienced steady improvement over the next three to five years. The decision is up to you, but market experts are telling investors that now is the time to jump onboard.
Edited by Stefania Viscusi