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Investing in an urban pad has never been more popular, but where to choose? Laura Henderson gets the investment lowdown on four of Europe’s top cities: two that have boomed over the past ten years and two that look good for the future
While a host of fly-to-let devotees have been piling into Eastern Europe’s “tiger economies”, canny investors are sizing up bricks and mortar assets closer to home. Those riding the property train will remember the 1990s regeneration cycle that transformed Euro stalwarts Barcelona and Palma, and history is now repeating itself in soon-to-be-hip, undervalued capitals Berlin and Lisbon. “Property has outperformed every other asset class over the last ten years,” explains Paul McMullen of Escapes2, “but while investors might have more of a taste for risk, the basic rules still hold good – always select properties with that little extra – in the best area you can afford, and keep a mind for rental yields.”
City investments in particular require a hard-headed assessment of the local housing market including location influencers like transport links and amenities. “The best performers tend to be markets that are re-rated following regeneration and gentrification and currently have above average yields,” adds McMullen. “Future house price growth in these places is likely to keep pace with or exceed the regional average.” The bottom line is to look to where housing, employment, transport and community come together in the right mix and tomorrow’s property bargain could well be within your grasp.
Barcelona
Real estate capital appreciation has been stellar over the last ten years in Spain’s second city confirms Marisa Dobner of Homesearch Barcelona: “Double-digit prices increases have been prevalent since 1997, fuelled by a growing economy, increasing employment and cheaper borrowing.” Other agents attribute the strong market to a cultural propensity for buying, although spiralling living costs in the past year, have led to a cooler market, with properties taking longer to shift. New build statistics paint a similar picture, with annual premiums now around 20% compared to nearer 40% a decade ago.
The edgy old city district of Born has the highest proportion of foreign ownership. Classic buildings have been given the designer treatment and prices are correspondingly higher starting from
€250,000 for a one-bed apartment. Developers have also been hard at work in the neighbouring Barrio Gotic. Homesearch Barcelona has a two-bed apartment five minutes from Las Ramblas for €270,000.
Future forecast
“Mallorca has a 365-days-a-year culture,” says Michael Pott of Balearic Properties. “It’s highly accessible and tops the fly-to-let charts for sustainable capital growth.”A former village on the city outskirts, Gracia has a unique community feel. Spacious, sunny flats are a snip at €150,000 and a metro line runs to the heart of the district. Property prices in two of the least expensive areas ten years ago, Poble Nou and Diagonal Mar, have now converged, the narrowing of difference between old and new reflecting the dramatic increase in price of available building land. “Poble’s beachside location makes it a perfect redevelopment zone,” adds Dobner. Nearby Diagonal Mar boasts a luxurious development of high-rise beachside apartments. Prices start from €150,000 for a studio. www.homesearchbarcelona.com
Palma
A catalyst to Palma’s revival came in the mid nineties with the resurrection of the historic centre which produced a showcase of chic patrician houses and boutique hotels like Tres and Pur. “Palma is a micro-market of the wider island,” explains Michael Pott of Balearic Properties. The island’s image has also been buffed by starry property buyers like Annie Lennox, while many Europeans from the Benelux and Scandinavia have boosted the carry on investing culture by stepping into the property vacuum created by the economically driven German withdrawal. “Prices have softened since the 1990s,” says McMullen, “but they remain robust.”
Plump for the old quarter and you’ll need deep pockets, a pequeno pad setting you back in the region of €300,000. Lying west of the city walls, restoration to the bohemian Santa Catalina barrio is currently under way; trendy eateries are raising the profile and a good stock of renovated three storey townhouses are being snapped up by a mix of local and foreign investors.
Tipped as the next growth area, El Terreno has prime location villas sporting panoramic sea views. Prestige Property has a stunning three-bed penthouse with views of Bellver Castle for €273,000.
Future forecast
Barcelona will be one of the biggest beneficiaries of European integration in the next ten years. “The rate of increase of asking prices for real estate has dropped since 2004,” says Dobner, “and prices in the next five years are set to stabilise.”
Backed by the Na Burguesa Mountains, Sa Vinya, a luxury gated community in Bendinat just 9km west of the capital, offers New York-style luxury condos with communal pools from €500,000. Now part of greater Palma a range of first-class apartments has changed buyers’ perceptions of Genova. On the market with thinkspain. com is a spacious three-bed villa with private pool for €859,500. Six years ago, beachfront fisherman’s cottages in Portixol, just outside Palma, sold for less than €50,000. Today they are valued at €300,000. Designer restaurants along this picturesque bay now nestle along side traditional seafood haunts. Balearic Properties have a three-bed frontline apartment for €268,570. www.balearicproperties.com www.escape2balearics.co.uk www.prestigeproperty.co.uk
Berlin
Few cities have enjoyed such a high-profile renaissance as Germany’s capital. Before the wall crumbled in 1989, East Berlin comprised state-owned prefabs and subsidised housing was common. Post-unification, a government backed building boom is now in full swing, with foreign investors attracted by low prices and yields some three or four percentage points higher than many European cities propelling the market. “Years of economic decline prevented Germany from cashing in the global housing boom of the last decade,” confirms William Telford of Berlin Invest, “and its housing market still remains one of the most depressed in the world.”
“People are just starting to break out the long-entrenched renting culture,” adds Dirk Zabel of ZFB Immobilien. “Just 12% of locals are owner-occupiers.”
Prenzlauer Berg is a leafy northern suburb of late 19th-century buildings, popular with affluent young Berliners. Prices start around €1,300 per square metre and rentals are well above average. Berlin Invest has new build one-bed apartments starting from €75,000 rising to over €250,000 for a renovated penthouse. A trendy alternative to the south is Friedrichshain located just off Frankfurter Allee. Twobed apartments are currently on the market for €105,000.
Future forecast
“The market can’t as yet promise double digit capital growth,” says Zabel, “but people here are buying with perspective – they fully appreciate that there’s no reason why in a few years Berlin can’t be like London, Paris or Rome Confidence in the luxury market has resulted in developments like those at Potsdamer Platz, a former no-man’s land between East and West. Leading architects including Helmut Jahn have worked with city planners to create the iconic glass and steel Sony Centre. The Esplanade is the centre’s residential wing featuring 13 floors of apartments ranging from 60sqm to over 200sqm with prices from €4,500 per sqm.
The nearby Tower and Parkside Apartments are presently Germany’s only urban flats with five-star concierge hotel service. Offering sweeping views of Berlin’s central park the Tiergarten, 14 Tower Apartments range from 230-680 sqm. Parkside, designed by London architect David Chipperfield, meshes contemporary and classical styles. Prices are from €5,000 per sqm. www.berlininvest.ie www.zfb-immobilien.de
Lisbon
Villas worth over €2.9m in the gold-plated southern triangle of the Algarve are a badge of affluence these days and an extravagant reminder of Portugal’s buoyant housing market. But away from the crowds and commercialism, Portugal’s vintage capital is quietly carving out its own share of the property pie. Tiered over seven hills above the River Tagus, downtown Lisbon is a fascinating product of the grid-pattern planning re-design of the Baixa quarter after the earthquake of 1755, with traces of antiquity everywhere. Like Berlin, post-recession renovation fever has set in, only this time with EU backing; key infrastructure being overhauled to support what will be one of Europe’s biggest house-building regeneration programmes. “Owners of dated properties will see the value in upgrading their small part of the city fabric,” explains Michael Heln who has been involved with the Lisbon property market for the past 20 years and witnessed a doubling of house values in the last few.
Future forecast
“Pricewaterhouse Coopers’ forecast of 2% GDP in 2006 looks promising,” says Michael Heln of Real Estate and Capital Investments. “Plus plans are underway for a second airport near Abrantes.” Housing in Lisbon is cheap; the cost of living well below that of neighbouring Spain and no Portuguese price index exists. “Areas like the Lapa palace district and Principi Real have a good stock of luxury penthouses around the €1m mark,” confirms Connie Vito of Quadrant Property Services. Alfama the old quarter has changed little in two centuries – two-bed apartments go for around €230,000. Many buyers, however, are plumping for off-centre districts like Rego, where 20-year-old apartments cost around €75,000 as well as Castelo and Mouraria where prices are on a par with Alfama.
Just north of Lisbon in Turcifal, Premier Resorts are selling homes with leaseback option at Campo Real golf resort. Prices start from €195,000 for a two-bed apartment up to €465,000 for a three-bed townhouse. Residential areas along the coast to Cascais have a certain cachet, detached villas with pools selling for around €550,000. Sintra to the north-west, a UNESCO World Heritage site has many hilltop villas surrounded by pine forests. Quadrant has a three-bed cottage for €250,000. www.quadrant-property.com www.reesin.com
Fancy investing in an urban pad? These fly-to-let homes cater for all styles and pockets
Barcelona
Stylish, two-bed refurbished apartment in quiet residential area of Eixample. www.homesearchbarcelona.com
Price in 2006: €440,000 Price in 1996: €190,000
Luxury three-bed house in San Cugat (right) near Collserola Natural Park.
Ten minutes to the city centre. www.johntaylorspain.com
Price in 2006: €1,500,000 Price in 1996: €650,000
Palma
Three-bed villa with pool and private gardens in Calvia. www.firstmallorca.com
Price in 2006: €645,000 Price in 1996: €225,000
Two-bed duplex penthouse (below) apartment in the prestigious Anchorage Club in Bendinat. www.escape2balearics.co.uk
Price in 2006: €460,000 Price in 1996: €165,000
Lisbon
Modern, two-bed apartment on Campo Real golf resort in Turcifal. www.premierresorts.co.uk
Price in 2006: €465,000 Price in 2016*: €1,200,000
Three-bed apartment in beautifully renovated listed building of Palacio das Janelas Verdes (left) with views of the River Tagus. www..hamptons.co.uk
Price in 2006: €790,000 Price in 2016*: €1,900,000
Berlin
Five-star concierge service Parkside Apartments with views of Tiergarten. www.zfb-immobilien.de
Price in 2006: €750,000 Price in 2016*: €1,500,000
Three-bed apartment on Prenzlauer Allee in the heart of the city. www.berlininvest.ie
Price in 2006: €198,000 Price in 2016*: €293,000
*ESTIMATED PRICE ONLY
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