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Europe

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Europe & International Real Estate WELCOME – PowerPoint PPT presentation

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Title: Europe


1
Europe International Real Estate
  • WELCOME

2
Learning Objectives
  • Identify how the social, economic, political, and
    geographical characteristics of European
    countries impact real estate.
  • Recognize how formation and development of the EU
    impacts member countries economically and
    culturally.
  • Develop market intelligence by researching
    factors that shape European real estate markets
    and assessing business opportunities.
  • Develop a network of key contacts in real estate,
    business, and government in order to reach
    clients and customers and complete property
    transactions.
  • Gain ideas on methods for promoting markets,
    properties, and services.

Page 2
3
Course Structure
  • Introduction
  • ? Europe Today
  • ?Market Dynamics Challenges, Choices, Trends
  • ?Does Culture Matter?
  • ?A Look at Germany
  • ?A Look at the United Kingdom
  • ?A Look at Spain
  • ?Country Profiles

Page 2
4
Countries Included
Austria Belgium Bulgaria Croatia Czech Republic Denmark Finland France Germany Hungary Ireland Italy Latvia Netherlands Norway Poland Portugal Russia Slovakia Slovenia Spain Sweden Switzerland Turkey Ukraine United Kingdom
Page 5
5
1. Europe Today
Page 8
6
Europe Lives Its History
  • Two World Wars
  • The Marshall Plan
  • NATO
  • The Cold War

Page 10
7
Europe Lives Its History
  • Fall of Berlin Wall, Cold War ends
  • Revitalization of Central and Eastern Europe
  • Formation of the EU
  • EU expansion 0407

Page 11
8
United in Diversity
  • Peace, prosperity and freedomin a fairer, safer
    world
  • Four Freedoms
  • Goods
  • Capital
  • People
  • Services

Page 12
9
Schengen Agreement
  • Unrestricted cross-border travel
  • No passport check at border
  • United Kingdom and Irelandopt out
  • Schengen area countries participate in the U.S.
    Visa Waiver Program
  • Except Poland

Page 12
10
EU Decision Making
  • Council of Ministers and European Council
  • Primary decision-making body
  • European Parliament
  • Cooperation
  • Assent
  • Co-decision
  • European Commission
  • Implements regulations and directives

Page 13-16
11
Reform Treaty
  • Streamlined decision-making
  • Capped EU Parliament at 751 delegates
  • 696 delegates per country
  • Subsidiarity and proportionality
  • Decisions made close to the citizen
  • EU acts only when more effective than local,
    regional, or national action

Page 16-17
12
Future Expansion
  • Stabilization and Association Agreements
  • Catch up economically
  • Unanimous approval required
  • Candidates FYROM, Iceland, Montenegro, Serbia,
    Turkey
  • Potential candidates Albania, Bosnia
    Herzegovina, Kosovo

Page 17
13
Turkey EU Membership?
  • ProCrossroads of East and West
  • Affinity to Europe
  • Constitution
  • Oil gas pipelines
  • Market opportunities
  • Large military
  • NATO member
  • Many Turks live in Europe already
  • ConToo big, too poor, too different
  • 5 of land is European
  • EU members disapprove
  • Immigrants
  • Human, minority, religious rights
  • Cyprus situation
  • Erodes small countries influence

Page 18
14
Cultural Heritages
  • Council of Europe as conservator and advocate
  • Cultural heritage a force for fostering social
    cohesion and inclusion
  • Dynamic resources built environment, natural
    environment, values, traditions, historic sites,
    arts, archeology, and languages

Page 22
15
Council Initiatives
  • European Heritage Days
  • Cultural Corridors
  • Culture Watch Europe
  • Compendium
  • Youth programs
  • Teacher training

Page 23
16
Cultural Heritage and Real Estate
  • Economic development
  • Town planning, building standards, and future
    development
  • Specialized building skills
  • Preservation enhances property values

Page 24-26
17
2. Market Dynamics
18
Demographics
  • European countries are aging, 2040 median age47
  • Reduced workforce, productivity, economic growth
  • Higher pension, health care costs
  • Intergenerational equity?
  • Some countries grow, some decline
  • Challenges for Real Estate?
  • Potential decreased demand for all types of real
    estateresidential, commercial, and retail

Page 30-31
19
Immigration
  • Challenge or a solution for demographic issues?
  • Integration into the society and the workforce
  • Immigrant in EU6 of population
  • 3 out of 4 immigrants live in Germany, Spain,
    U.K., France, or Italy
  • Challenges for Real Estate?
  • Population growth correlates with demand for real
    estate. Immigrants become homeowners, renters,
    business owners, and retirees.

Page 32-35
20
Employment
  • Unemployment
  • Lack of job opportunities
  • High youth unemployment
  • EU Youth Guarantee
  • Erosion of fundamental economic capacity
  • Challenges for Real Estate?
  • Can workers buy a home, form a new
    household?Correlation with commercial and retail
    real estate.

Page 35-38
21
North-South Disparity
  • Triggering events global recession, revelation
    of Greeces misstated deficit
  • Scrutiny on Spain, Ireland, Italy, Portugal
  • Solvent, optimistic, prosperous north versus
    indebted, pessimistic struggling south
  • France northern economy, southern attitude
  • Challenges for Real Estate?
  • Capital flight, high-yield buying opportunities
    with high risk, erosion of property values,
    suppressed demand.

Page 38-40
22
Future of the Euro
  • Monetary union without a fiscal (banking) union
  • Interconnected globally, few firewalls
  • Governance structure slows action
  • ECB policy mandate maintain stability, low
    inflation
  • Challenges for Real Estate?
  • High cost of dismantling the eurozone? Currency
    devaluations would cause immediate value loss.
    Investor equity wiped out. Recalculation of
    mortgages. Investor stampede to exit.

Page 41-42
23
Integration or Separation
  • Break up EU or integrate to solve structural
    issues?
  • Will countries be willing to cede more control?
  • Scared into greater integration?
  • Will future generations see EU membership as a
    benefit or a burden?
  • Challenges for Real Estate?
  • Dissolution without planned transition would
    provoke economic chaos. Integration could
    standardize property transaction procedures

Page 42-44
24
National Banks or Banking Union
  • Completion of an EU banking union for financial
    stability and consistency
  • Pre-crisis no enforcement mechanisms or
    consequences for missing goals
  • Post-crisis EC and ECB moving toward a banking
    union, SSM, SRM, deposit guarantees
  • Challenges for Real Estate?
  • Real estate thrives in an environment of orderly
    financial markets and banking systems.

Page 44-45
25
Europe 2020
  • Smart Developing an economy based on knowledge
    and innovation
  • Sustainable Promoting a more resource efficient,
    greener, and competitive economy
  • Inclusive Fostering a high-employment economy of
    economic, social, and territorial cohesion
  • Challenges for Real Estate?
  • Roadmap for the EU to recover and prepare for the
    next decade. See page 46 of Manual.

Page 46-47
26
Europe 2020 Economic Governance
  • European Semester
  • Stabilization and Growth Pact
  • Euro Plus Pact
  • Challenges for Real Estate?
  • Economic monitoring for property bubbles, growing
    current account deficits or surpluses, or
    decreases in competitiveness

Page 47-48
27
Austerity or Government Stimulus
  • National budgets are more complex than households
  • Continuing austerity or increasing government
    spending to stimulate the economy?
  • Economic growth or downward deflationary spiral?
  • Challenges for Real Estate?
  • Austerity has generated a general downward spiral
    as economic capacity diminishes and real estate
    investment is postponed, infrastructure
    deteriorates.

Page 48-49
28
Residential Real Estate
  • High rate of homeownership 70
  • Highest ownership rates in Central and Eastern
    European
  • Germanywealthy country but majority rent, very
    pro-tenant
  • House price trends reflect north-south economic
    disparities

Page 49-51
29
Housing Bubbles
  • Rapid price appreciation Estonia, Slovakia,
    Latvia
  • Spain and Ireland housing construction booms
  • Euro mortgages in non-euro countries
  • Recourse debt

Page 52-53
30
Mortgage Directive
  • Standardized Information Sheet
  • Warnings on foreign-currency loans
  • Evaluation of borrowers ability to repay
  • Early pay off permitted
  • Authorized intermediaries passport
  • Encourage reasonable forbearance
  • No mandatory LTV or DTI

Page 53
31
Property Expos
  • Barcelona Meeting Point
  • CEREAN Conference
  • Expo Real
  • FIABCI World Congress
  • MIPIM Europe
  • OPP Live
  • Place in the Sun
  • RECon

Page 58
32
Investor Visas
  • Intersection of bargain real estate and
    non-European wealth
  • Investment buys resident status
  • Unrestricted travel in Schengen area
  • Safe haven for cash
  • Access to prestigious schools, universities
  • Personal safety
  • Moral, ethical questions?

Page 54-55
33
Commercial Real Estate Trends
  • Foreign direct investment returning to pre-crisis
    levels
  • Competition for prime assets
  • Cash chasing assets
  • Sustainability as a strategy

Page 55-56
34
Your Challenge Business Building
  • Who is my target market and where are they?
  • How can I reach them?
  • What does my target market buy or sell?
  • What is my value proposition?
  • Will I compete on time, cost or quality?
  • No planning is a plan to do nothing.
  • How will you meet the challenge of building your
    European real estate business?

Page 57
35
Keeping Up-to-Date
  • Market information
  • Prospects and clients
  • Reminders
  • Maps
  • Spheres of influence
  • News and trends
  • Magazines, journals, books, and newspapers

Page 59
36
3. Does Cultural Matter?
37
High and Low Context
  • High Context
  • Low Context

Values formality, face-saving communication,
relationships and the slower pace needed to
develop them
Values informality, results, fast pace,
punctuality, and direct communication
Page 62
38
Geographic Location
  Geographic Location Geographic Location Geographic Location
  North and West Central   South and East  
High Portugal Spain Hungary Bulgaria Greece Italy Romania Russia Turkey Ukraine
CONTEXT Belgium France U.K.      
Low   Denmark Finland Germany Ireland Netherlands Norway Sweden Switzerland Austria Czech Republic Latvia Poland Slovakia  
Page 63
39
4. A Look at Germany
40
Geography
  • 16 Federal States (Länder)

Page 68
41
25 Years After Reunification
  • Economic convergence
  • Privatizing property
  • Solidarity tax
  • Social convergence

Page 69-70
42
When Germans Buy Homes
  • Once-in-lifetime event
  • No MLS, brokers sell their own listings
  • All of the facts, please
  • No extended preclosing time
  • Signing ceremony completes transaction

Page 72-73
43
Nation of Renters
  • Once a renter always a renter
  • Lowest rate of home ownership in the EU
  • About 53 own homes
  • Laws are very pro-tenant

Page 74
44
Energy Efficiency
  • Required energy certificates
  • Demand-oriented certificate
  • Consumption-oriented certificate
  • Provides information on energy operating costs
  • Allowable factor for rent increases

Page 74
45
When Germanys Buy Abroad
  • Mediterranean coastlines and islands, west coast
    of Florida
  • Check direct air routes from German hubs
  • Deliberate approach to second home buying
  • Buyer loyalty may be an issue

Page 75
46
When Foreigners Buy in Germany
  • No restrictions on foreign purchase
  • All proceedings are conducted in German
  • Hire an interpreter
  • Obtain a copy of the purchase contact before the
    signing ceremony
  • Be prepared to ask questions during contract
    reading

Page 75
47
Commercial Real Estate
  • Concentrated in Berlin, Hamburg, Düsseldorf,
    Frankfurt, Munich, and Stuttgart
  • Eastern Germany lags behind the west
  • Competition for prime assets bids up prices
  • Spillover seeks opportunity in outlying areas,
    second-tier cities

Page 75-77
48
Doing Business
  • Rules and regulations contribute to an orderly
    life
  • Business proceeds without a personal
    relationships
  • Straightforward communications
  • Punctuality!
  • Contracts followed to the letter

Page 78-79
49
Beyond the Basics
  • Business and personal life are separate
  • Working overtime shows lack of planning
  • No hand gestures, touching, or backslapping
  • Homethe one place where a German can relax, show
    individuality

Page 80
50
5. A Look at the United Kingdom
51
Geography
  • England, Wales, Scotland, Northern Ireland
  • All citizens of U.K. are British
  • Only those from England are English
  • Scotland, Northern Ireland, Wales gradual home
    rule, devolution
  • High-speed Eurostar rail servicethe
    Chunnelconnection to continent

Page 82-83
52
Economy
Page 84
53
Conveyancing
  • The transaction process
  • Buyer and seller appoint conveyancers or
    solicitors
  • Offers not a legally binding until contracts
    exchanged, deposit paid
  • Conveyancer sets a date for completion of the sale

Page 84-87
54
Housing Trends
  • Chronically undersupplied and high priced
  • Stagnated pace of homebuilding
  • Aging housing stock
  • Pent-up demand

Page 88
55
Mortgage Lending
  • Help-to-Buy Mortgage Guarantee
  • Help-to-Buy Equity Loan
  • Mortgage Review
  • Ascertain borrowers capability to repay
  • Fully advised sale
  • Restrictions on interest-only mortgages

Page 88-89
56
Buying Abroad
  • British retirees, holiday homes
  • Mediterranean
  • Iberian coastline islands
  • France
  • Central Florida
  • Where direct flights reach sun and sand

Page 90
57
When Foreigners Buy in the U.K
  • 85 of new London homes bought by foreign
    investors in 2013
  • Wealthy buyers Russia, China, Singapore, Hong
    Kong, Malaysia, India, and Middle East
  • No restrictions, low capital gains tax
  • Middle-income buyers priced out of market
  • Controversy Luxury homes stand empty with
    housing in short supply

Page 91-92
58
Commercial Real Estate
  • Perennial favorite of international buyers
  • Stability, quality of assets, many investment
    grade properties, prestige, value growth
  • Competition pushes prices up but depresses yields
  • London plus the Big 8
  • Bristol, Birmingham, Cardiff, Edinburgh, Glasgow,
    Leeds, Manchester, and the West Corridor

Page 92-96
59
Doing Business in the U.K.
  • Observe formalities
  • No back pats, hugs, or air kisses
  • Be on time
  • English are masters of understatement
  • Make your case with facts and solid evidence
  • Avoid a hard-sell approach

Page 97
60
Beyond the Basics
  • Multiculturalism reflects the colonial history
  • Guard personal privacy, dont discuss personal or
    family matters
  • Keeping a stiff upper lip
  • Younger generations more relaxed about protocol
    and interpersonal interactions

Page 97-98
61
6. A Look at Spain
62
The Costas of Spain
Catalonia
Valencia
Balearic Islands
Andalucía
Canary Islands
Page 100-101
63
The Boom
  • The Spanish Miracle
  • 15 years of above average-GDP growth until 2007
  • Built on bricks and sunshinehome construction
    and tourism

Page 102
64
The Real Estate Bubble
  • Enablers
  • Abundant and cheap mortgage financing
  • Loosened banking regulations
  • Pent-up demand
  • Vacationers and retirees seeking warm climate,
    low cost of living
  • 200 price increase 1996 to 2007
  • More new homes under construction than Germany,
    France, and the U.K. combined

Page 102-103
65
The Economic Crisis
  • 2007 global financial crisis
  • Housing starts plummeted
  • Thousands of furloughed workers
  • Other European economies faltering
  • Repossessions and evictions
  • Shadow economy thriving

Page 104-106
66
SAREB
  • Spains bad bank
  • Removed 50 billion in sour real estate assets
    from bank balance sheets
  • Assets repackaged, sold to investors
  • Small savings banks (cajas) compete to unload
    properties
  • Monitor SAREB activity

Page 107
67
Comeback
  • Buyers looking for opportunities
  • Foreigners made 21.4 of residential purchases in
    2013
  • Buyers from England, Germany, Denmark, and
    Sweden, Middle East, Asia, and Russia
  • Visa investor purchases
  • Aspects that make Spain attractiveclimate, sun,
    beachesstill there

Page 107-108
68
The Future
  • 2015 as turnaround year?
  • Low Euribor rate keeps mortgages payments low
  • Several years of inventory on the market
  • No new construction in the pipeline
  • Future shortage of quality of homes buyers want
    to purchase?

Page 108-109
69
Spanish Real Estate Transactions
  • No restrictions for foreigners to buy and resell
    real property
  • Some differences in taxation of foreign real
    estate ownership
  • Access Spanish property registry records and info
    at http//registradores.org

Page 109-112
70
Commercial Real Estate
  • Madrid and Barcelona
  • Commercial downturn, same as housing
  • Stabilized at the bottom of the cycle?
  • Opportunities for risk-tolerant investor
  • Introduction of SOCIMIs (exchange-traded real
    estate investment funds)

Page 113
71
Madrid
  • Center of country, capital, and largest city
  • Population 3.3 million (6.5 Million metro area)
  • International finance, corporate headquarters
    offices, government administration
  • Prime areas
  • CBD Paseo de la Castellana (CBD)
  • Calle Serrano and Calle de José Ortega y Gasset
    (the Golden Mile)
  • High-speed AVE rail network hub

Page 114-115
72
Barcelona
  • Second largest city in Spain
  • Population 1.6 million (4.5 million metro area)
  • On the Mediterranean coast
  • Prime areas
  • Avinguda Diagonal
  • Passeig de Grácia
  • 2014 European Capital of Innovation Award
  • Center for art, architecture, and design
  • Official language is Catalan

Page 114-115
73
Doing Business in Spain
  • Take the time to develop a relationship
  • Loyalty is to the individual, not the company
  • Saving face is important
  • Observe body language

Page 116
74
Beyond the Basics
  • Intense Madrid and Barcelona rivalry, dont make
    comparisons!
  • Castilian official language of Spain, but other
    official languages
  • Catalan in Barcelona, Valencia and the Balearic
    Islands(not a Spanish dialect)
  • Galacian (Gallego) in Galicia
  • Basque (Vasco) in Basque country

Page 117
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