Investing in Property Abroad – 6 factors to evaluate an opportunity?

April 3, 2014

Which are the rising economic stars in Europe and present a serious option for investors seeking solid investment returns. An interesting way to consider this is by seeing how cities fare against six criteria established by the Economist Intelligence Unit’s (EIU) research ‘Benchmarking the Future Competitiveness of Cities’ as key to establishing a city’s or country’s ability to attract investment and therefore create a sturdy property market.

A robust property investment location – 6 factors

1) Economy – economic growth and size of GDP

Robust property market & economyPoland is the leading EU economy in the Central and Eastern European region. Average growth rates have been 3.3% for the last 20 years and are projected to be 2.5% per annum. This makes Poland a serious competitor to Germany.

2) Physical Capital – infrastructure, telecommunications

Poland’s infrastructure has benefited from European Union investment which, together with government funds, tallied more than €100bn by 2013 for road projects, motorways and railways. Poland is at the heart of Europe, so it is a great place for factories, warehouses and logistic operations of large multinational businesses and has attracted subsidiaries of big firms like Coca Cola, Dell, GE, Gillette P&G, Ikea. VW is also investing $1.2 bn (3.4 billion zlotys) in a van factory in near Poznan, East of Warsaw.

Shale Gas is a potential game-changer. In the US tapping into vast reserves cut consumer energy bills. Poland is now well positioned to lead shale gas development in Europe. It has one of the largest reserves for shale gas in Europe.

3) Institutional character – regulatory and legal framework

The latest Jones Lang LaSalle 2012 Global Real Estate Transparency Index /Property Index (it has a commercial property focus, but is a proxy indicator for the residential property market since many processes are similar e.g. ownership or title registration).

Most transparent markets continue to be dominated by the more liquid Anglophone countries. The US ranks as the world’s most transparent real estate/ property market in 2012, followed closely by the United Kingdom and Australia. Poland ranks in the top 20, not far behind Germany.

4) Human Capital – skilled labour force, access to quality education

Krakow Jagiellonian University is the oldest in World (1364) and the University of Warsaw is of international stature. To put this into context, Poland has 500 universities, about double the number in the UK.

Poland has an educated population and in some respects has played an outsourcing role like India or China has performed, in the white collar sector. Google have set up Polish laboratories to take advantage of good computer programmers.

Poland’s Special economic Zones have played their part in this and attracted multinational companies to Cities like Krakow, whose suburban office parks are home to one of the most dynamic shared services markets in the world.

5) Financial Maturity – access to capital and investment finance

73 billion euros of European Union money will be invested between 2013-2020, with the aim of closing the gap between Poland and Western Europe. Poland sees its future moving from a low-cost economy, to one based on knowledge and technology.

For a foreign national buying an investment property there are a number of Polish Banks which offer mortgages. On the whole Polish banks tend to be risk-averse and ask for a number of points of credit reference. Interestingly, the UK lending market has become more like the Polish mortgage market latterly.

6) Cultural and social character – lifestyle global appeal, dynamism

Lots of people have come in contact with their favourite Polish Builder or decorator and find them hard-working.

Cities like Krakow have huge appeal for international visitors. Krakow oozes culture and history, as a former medieval capital it makes a great location given all its historic connections and proximity to Auschwitz. Krakow’s heart is the Rynek Glowny (Market Square) and surrounding historic places of the Old Town. There are plenty of theatres, art galleries, museums, colleges, as well as an Opera, botanical gardens, restaurants, coffee shops and shopping centres, not to mention Wawel Castle.

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Property Venture® is an award-winning, UK-based agency for overseas property who helps people buy investment property and holiday homes in Europe, more easily and safely than they can on their own, because we offer grounded common-sense advice.

The focus is mainly greater Europe: Poland property, UK investments, Spain property, Turkey property, Cyprus property

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