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Top 3 gainers and top 3 loser cities in 2017. What you should know before you buy a property.

23 January 2017  ·  ORDO Capital
Location is crucial factor for investment. Berlin, Vienna and London – are three main capitals, where housing prices from 2008 to 2016 continuously increased. Of course, in Berlin they rose significantly.


According to the data by Investionsbank Berlin, after the crisis, property in Berlin rose 2.9 times (or 186.5%) – from around 1610 euros / m² to 4613 EUR / m². This boom in Berlins’ real estate in recent years has been caused by several factors: population growth, unemployment decline, fall of mortgage rates (1% per annum). Demand for real estate in Berlin exceeds supply. Also, in Berlin local rental market is very popular – 80% of Berliners rent apartments. Demand in Berlin, especially in the primary market, will continue to exceed supply and prices will continue to rise.


In London prices of real estate from 2008 to 2016 rose by 84%. Accommodation in the British capital has risen in price on average from 300 000 euros in 2008 to 560 000 euros in the III quarter of 2016. A square meter in the centre of London costs around 18 000 euros. Of course, Brexit made some changes in 2016: in city areas apartments are offered for 15-25% cheaper than before referendum. The decline in 2016 was also observed in the secondary segment of the elite facilities in London, but in the whole city real estate rose in price. In 2017 the London market will likely stagnate, but in 2018 the prices here will rise again. But of course there is a high risk of uncertainty in this segment.


Another market, which will be interesting is Vienna. According to the data by Austrian National Bank price index for housing accommodation in 2008-2016 went up by 70.7%. A square meter in the city now is 4000 - 11 000 euros. Vienna market can be compared to the Berlins market: here 80% of the population rent apartments, and international investors are actively buying up local properties for renting purposes. It is likely that in 2017 mortgage rates in Austria will remain low (2-3% per annum) and the demand will continue to outstrip supply, so you can expect that property prices will continue to grow in Vienna.


And here are listed three cities, where situation is not so bright as in previous markets. The main reasons, why dynamics of housing prices fell are political and economic situations in country.


House prices are now falling at a slower pace in Greece, compared to the sharp price drops of 2012 and 2013 - but are unlikely to begin rising. Greek residential property prices are down by 42% from the peak year of 2008.Despite the slight improvement, activity is amazingly depressed. In 2015, the number of residential property appraisals-transactions was down by 24.1% from the previous year. Also, only 13,257 building permits were issued in 2015, a striking contrast from the 70,000 to 80,000 permits issued annually from 2004 to 2007. The housing market is expected to recover with a relative time lag, largely depending on the increase in households’ disposable income, a rise in employment, as well as an improvement in bank financing conditions.


Dynamics of housing prices from 2008 to 2016 fell by 35%. Situation in Romania is improving, but not so fast as it could be. The Romanian economy grew by 3.8% in 2015, and growth of 5% is expected in 2016. In 2017, the economy will still expand but at a slower pace of 3.8%, according to the IMF. Newly introduced fiscal regulations (it reduces the standard VAT rate from 24% to 20%, but also simplifies the tax collection process, to boost investment and economic growth) are gathering supply for the market.


From 2008 to 2016 housing prices fell by 25%. In 2017 prices, will not go up, but Croatia’s property market is recovering slowly. In Croatia’s capital, Zagreb, the average price of new dwellings sold dropped slightly by 1.3%.


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