The Baltic countries Latvia and Estonia, have seen steady growth despite facing geopolitical challenges and high inflation. As the region moves forward into 2024, market participants remain cautious, resulting in slower construction volumes and general sluggish market activity. However, the Baltic capitals, insulated by low household debt and population growth, maintain a positive outlook for the future.

Estonia: Economic Recovery

Estonia faced a 1.3% economic shrinkage in 2022 but is projected to experience steady growth in 2023. The office space market saw new projects and expects further expansion in the coming years. Retail projects were limited in 2022, while the industrial sector witnessed growth due to increased e-commerce activities. Residential properties in Tallinn experienced significant price increases, driven by various factors. Meanwhile, the rental market saw a decrease in supply and increased prices, partly influenced by the refugee influx from Ukraine. But the rental prices have not increased much compared to the property prices, reducing the average rental yield from ~6% to 4-5%.

In 2022, the apartment market in Tallinn experienced contrasting trends. While the number of apartment deals decreased by 11%, indicating a decline in activity, the total financial volume increased by 8%, suggesting that higher-priced transactions contributed to the overall financial growth. On average, 190 new apartments were sold each month, accounting for 24% of all apartment transactions in Tallinn. This signifies that despite the decrease in deals, new apartments remained in demand.

In 2023, the housing market was expected to be impacted by rising interest rates, which could have implications for buyer affordability and market dynamics. However, despite the decline in activity, the average transaction price has continued to grow. In 2023 Q2 there were 2459 residential real estate transactions in Tallinn, with an average price of 3136 euros per m2. Compared to the Q1 of 2023 the average price increased 6,7%.

The majority of real estate deals take place in Tallinn and within a 25 km radius outside the city, particularly in districts such as Rae, Saku, Saue, Harku, and Viimsi. These districts have higher average prices, and there is an observable price increase based on location, especially in well-established private residential boroughs like Nõmme, Kakumäe, Pirita, and the districts bordering Tallinn. Over the past year, the popularity of Kiili and Saku districts has also increased, indicating shifting preferences and emerging opportunities in these areas.

The rapid slowdown in inflation is expected to bring relief to households in Estonia. When compared to other Baltic countries, Finland, Sweden, and Germany, consumer expectations in Estonia are relatively low. The impact of inflation on household deposits and consumption has decreased, as household deposits fell from their high levels in the middle of last year. While rising interest rates may have a short-term impact on households, the slowdown in inflation provides some relief. Euribor is expected to peak later this year, but the decrease will be gradual.

Despite the prolonged recession, the real wage in Estonia has started to grow in the spring of 2023. Strong wage growth is contributing to an increase in real wages, which positively affects consumption. The average gross salary reached 1981 euros in 2023 June, which is a new record high.

However, it is expected to take until next year for the real wage to fully recover from its previous decline. The labor market in Estonia has remained relatively stable, with high employment and moderate unemployment rates. Rising real wages, combined with favorable employment conditions, are expected to support household consumption. However, the growth of consumption will depend on the improvement of household confidence. While tax increases planned for next year may boost private consumption towards the end of this year, overall consumption this year is expected to decline. In 2024, private consumption is projected to increase, but its growth will remain below the long-term average.

Latvia: Navigating Challenges

Latvia initially had a positive outlook after the Covid-19 pandemic, but the forecasts now predict a shallow recession. Retail turnover increased, yet real net wages decreased. The office space market is expected to grow and stabilize rent prices, with companies favoring smaller, energy-efficient spaces due to the prevalence of hybrid work models. The residential and land markets experienced mixed results, with demand and prices fluctuating throughout the year, influenced by speculation and cautious consumer behavior.

The real estate market in Riga faced a shift in apartment prices during 2022. As demand for apartments decreased in the second half of the year, sale prices experienced a slight decline. However, overall apartment prices still managed to increase by 4.5% throughout the year. Prices for new apartments in the city center were higher, ranging from €2,900 to €4,300 per sqm by the end of 2022, while luxury projects and locations reached prices as high as €7,000 per sqm. Suburban new apartments were selling for €2,100 to €3,500 per sqm.

The real estate market in Riga faced challenges in 2022 for both developers and buyers. Various global events, such as the Russia-Ukraine war, had severe impacts on the market. The war initially caused a halving of real estate advertisement searches, but customers returned with renewed interest in the spring. Construction prices became unpredictable due to the war, and compact apartments with functional layouts gained emphasis. However, a shock occurred in the fall of 2022 when the Central European Bank raised interest rates, resulting in a slowdown in sales. Despite rising prices and interest rates, there is still interest in new projects, particularly energy-efficient housing.

The number of apartment sales transactions in Riga in 2022 saw a decline of approximately 4% compared to 2021. The war and its consequences, including unpredictable construction prices and inflation, affected demand. The beginning of 2022 showed a stable sales volume, and demand even increased during the summer. However, the sales slowdown occurred in the third quarter due to rising inflation, increased prices of construction materials, reduced availability of materials, and the European Central Bank’s interest rate hike. Many buyers were unable to afford loans, leading to a decrease in demand. The market saw an increase in series-type apartments as owners sold old units to purchase apartments from new developments.

In 2023, Latvian wages experienced growth in line with inflation, indicating an improvement in purchasing power. However, private consumption faced challenges due to the high cost of living. While purchasing power has been gradually increasing since the middle of the year, a full recovery is expected to take some time.

The second half of 2023 is expected to bring a return to growth in the purchasing power of workers in Latvia. According to Swedbank customer data, nominal wages in June were already increasing at a faster rate than inflation. Although the high overall price level may continue to deter some consumers, the resumption of real wage growth, coupled with improved consumer sentiment, is anticipated to support private consumption in the future. Additionally, investment linked to EU funds is expected to provide a boost to the economy.

Conclusions

Despite challenges and caution from market participants, the Baltic countries continue to show resilience and adaptability in their real estate markets. With a focus on prudent decision-making and a positive long-term outlook, these countries aim to navigate and overcome economic and geopolitical uncertainties, ensuring sustainable growth in the real estate sector.

Estonia and Latvia are the local markets of Reinvest24, where we have the most experience and knowledge, resulting in a perfect track record for our real estate projects in this area. We have currently several ongoing real estate projects in those markets, and we are confident that we will complete them successfully and earn our investors above the market returns.

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The UK real estate market has long been a popular destination for global investors, and for good reason. With its strong economy, stable political climate and transparent legal system, it’s no surprise that the UK has consistently ranked as one of the top countries for property investments. It’s a huge market that offers a lot of opportunities, but extensive expertise and strong local presence is required to find and utilize these opportunities.

Strategic Partnership With Shojin Property Partners

We are delighted to announce our new strategic partnership with Shojin Property Partners, an FCA regulated investment company based in the UK. Shojin has a rich history in real estate development spanning over a decade, and has since evolved into a licensed market participant specializing in originating and structuring institutional-grade real estate investment opportunities in the highly profitable UK market.

Shojin’s unique investment approach involves conducting comprehensive due diligence, investing their own capital into projects, providing end-to-end oversight, and sharing profits instead of imposing significant upfront fees. This methodology ensures a perfect alignment of interests and represents a significant advancement over traditional private equity investment models. Furthermore, Shojin assumes primary responsibility for any losses incurred by investors, thereby providing an additional layer of security.

Reinvest24 has enjoyed a fruitful collaboration with Shojin for more than two years through our mutual participation in the AREIP organization alongside other European real estate investment platforms. Drawing on this experience, we are confident that our core values and understandings are closely aligned with those of Shojin’s CEO and team members who also serve on the AREIP committee.

Average UK House Prices

The UK real estate market has always been highly sought after both domestically and globally in terms of investment opportunities. As such, it’s important to keep an eye on the latest trends and future predictions for this industry. One significant indicator for the UK housing market is the average house price.

Since the 2008 financial crisis, the UK housing market has seen a steady rise in average house prices. According to offical data from the Nationwide, the average house price in the UK was £265,000 as of December 2022. With the recent rate hikes together with double digit inflation, the average prices have seen a slight decline, settling at £258,000 by end of March 2023. The decline has been bigger in the northern part of UK, while the areas around London has been more stable due to high demand.

This upward trend in house prices is expected to continue. However, it’s worth noting that different regions of the UK may experience different average house price trends. For example, London’s housing market is known for being incredibly expensive, with the average house price being much higher than other regions. On the other hand, some areas in the north of the UK have seen more modest average house price increases in recent years.

Overall, the future of the UK housing market is predicted to see ongoing price increases due to various factors like the ones mentioned above. It’s a lucrative market for those looking to invest in real estate, but it’s important to stay informed and keep an eye on the ever-changing market trends.

Interest Rates and Inflation

Interest rates and inflation are two critical factors that affect the UK real estate market. These factors can have both positive and negative impacts on the market.

Interest rates: The Bank of England has been increasing the interest rates as expected. With the latest 0,5% increase in 2023 June, the interest rate is currently at 5% and it is expected that it will stay in that range until the end of this year. The increasing interest rate has put more pressure on the residential real estate market and mortgages. But this has not had a huge impact on the prices, it just slowed down the real estate market in terms of transactions, with small price fluctuations, depending on the area.

Inflation: Inflation has hit its high of 11.1% in 2022 October, staying slightly above 10% until 2023 March. Now finally the inflation has started to decline after several interest rate hikes, closing the May at 8.7%. It was expected that this scenario will have a big impact on the real estate prices, but the real estate market has demonstrated stability and strength in the current times.

It is expected that both the inflation and the interest rates have peaked by now in the UK. If inflation will continue to decline, the interest rates will follow this trend, allowing the market to continue growth.

Employment and Labor Market

The UK real estate market is heavily dependent on the health of the economy, and employment and labor market trends play a key role in determining demand for commercial and residential properties. In recent years, there has been a significant increase in the number of office-based jobs in the UK, particularly in major cities such as London and Manchester. As a result, large numbers of workers are now looking for high-quality, affordable accommodation.

According to a recent report by the Office for National Statistics, average total pay growth was 5,9% in the period of December 2022 to February 2023. The unemployment rate was 3,8% at the end of February 2023. This suggests that the labor market is strong and demand for housing is likely to remain high. The labor market date is also giving the domestic and international investors the confidence to continue their investments in the UK real estate market.

One important factor to consider is the rise of the gig economy and self-employment. This trend is particularly prevalent among younger workers who are looking for more flexible working arrangements. This could lead to an increased demand for co-working spaces and serviced offices.

It is also worth noting that the UK has a large share of the office workforce employed in the financial and professional services sectors. This means that there is a need for high-quality office space in prime locations, particularly in London.

To capitalize on these trends, developers and investors need to keep a close eye on employment and labor market data to identify key growth areas. They should also focus on creating properties that meet the needs of workers in these industries, including high-quality office and residential accommodation, as well as flexible co-working spaces.

Impact of Technology and Innovations

The UK real estate market is catching up with the latest technological advancements and innovative gadgets which are redefining the way properties are bought and sold. As noted by Deloitte, the real estate industry is starting to realize the benefits that these new technologies and innovations are bringing to the market.

One significant impact of technology on the UK property market is complete digital access. With the emergence of digital platforms like Zoopla, Rightmove, and other property search engines, buyers can view properties from the comfort of their own homes. According to a recent report by Zoopla, online searches for properties were up by 30% YoY, showing the growing preference for digital access. This trend is likely to continue as buyers seek more convenient ways to search for properties.

Another technological advancement that is transforming the UK real estate market is the use of virtual and augmented reality gadgets. These innovative gadgets are enabling buyers to view properties with high precision and accuracy. A recent study by Goldman Sachs revealed that virtual and augmented reality could add value to the real estate sector by reducing site acquisition costs, speeding up the decision-making process and improving customer engagement. This technology is set to revolutionize the way buyers and sellers interact with the property market in the UK.

In the commercial real estate sector, technology is revolutionizing how buildings are being managed and operated. From energy-efficient lighting to smart heating and ventilation systems, innovative technologies are helping to reduce costs and make businesses more sustainable. The recent pandemic has also spurred the adoption of new technologies, such as contactless entry and remote working, which is likely to continue even after the pandemic subsides.

In the residential property market, technology is transforming how people live and work in their homes. Smart home technology is becoming increasingly popular, with 11% of households in the UK having a smart home device. These gadgets can control heating, lighting, security systems, and even kitchen appliances. In the future, we could see more innovative solutions like homes that can generate their energy and manage waste.

The Future of UK Real Estate Investment

The UK real estate market has long been a popular destination for global investors, and for good reason. With its strong economy, stable political climate and transparent legal system, it’s no surprise that the UK has consistently ranked as one of the top countries for property investments.

To gain a better understanding of the future of UK real estate, it’s important to examine some of the emerging trends in the market. Here are some key areas to watch out for:

Growing demand for residential property: Despite the challenges posed by the COVID-19 pandemic, demand for residential property in the UK has remained strong. With interest rates at historic lows and an increasing number of people looking for larger homes with outdoor space, the demand for residential property is expected to continue rising.

Focus on sustainable property types: Sustainability is becoming an increasingly important factor for property investors. Commercial and residential properties that are energy-efficient and environmentally friendly are likely to become more popular as investors look for long-term assets with lower operating costs.

Increased use of virtual estate agents: Virtual estate agents are becoming more common in the UK, allowing buyers and sellers to complete transactions online without the need for in-person viewings. This trend is likely to continue as buyers become more comfortable with virtual transactions.

Continued growth in the commercial real estate market: The UK remains one of the biggest commercial real estate markets in Europe, with strong demand for office, retail, and warehouse space. This trend is expected to continue as businesses look to expand and grow post-pandemic.

Technology driving innovation: Technology is playing an increasingly important role in real estate, with companies using data analytics and artificial intelligence to make more informed investment decisions. This trend is expected to accelerate as the industry becomes more reliant on technology.

Rise of co-living spaces: Co-living spaces are becoming more popular in the UK, particularly for younger renters who are looking for affordable, flexible accommodation. This trend is expected to continue as co-living providers expand into new markets and diversify their offerings.

Increased investment in affordable housing: The demand for affordable housing in the UK continues to grow, with an increasing number of people struggling to get onto the property ladder. As a result, there is likely to be increased investment in affordable housing projects to meet this demand.

Key Trends to Watch Out For

The UK real estate market has always been a global hotspot for real estate investment. Despite the uncertainties around Brexit and the COVID-19 pandemic, the UK property market remains a lucrative hotspot for both domestic and international investors. However, with the ever-changing economic and political landscape, it is crucial to stay abreast of current and future trends shaping the UK real estate market. Here are four key trends to keep an eye on:

The rise of alternative asset classes: While traditional asset classes such as residential and commercial properties remain popular, there has been a significant rise in alternative asset classes such as student accommodation and build-to-rent (BTR) properties. Investors are increasingly turning towards these asset classes due to their stable income streams and long-term prospects. According to a recent report by Deloitte, “alternative asset classes such as build-to-rent, student accommodation, and retirement living will continue to be seen as an attractive investment opportunity.”

Emphasis on sustainability and green energy: With the urgency to tackle climate change, sustainability and green energy are becoming increasingly important in the property industry. The UK Government’s Net Zero 2050 target and the introduction of new legislation such as the Minimum Energy Efficiency Standards (MEES) mean that investors and developers need to prioritize sustainability when designing and developing buildings. Properties with high sustainability standards are expected to attract higher prices and rental yields.

Impact of political events and geopolitical risks: Political events such as the Russian conflict with Ukraine and Brexit negotiations can have a significant impact on the UK real estate market. These events can cause uncertainty, resulting in decreased investment and transaction volumes, which in turn can affect property prices. As a recent report by JLL highlighted, “property markets are often sensitive to geopolitical risk…any irritations can affect investor sentiment and the ability to transact.”

Technology and innovation drive change: Advancements in technology and innovation are changing the way people live and work, driving change in the real estate market. Smart buildings, virtual property viewings, and blockchain-based property deals are examples of technology-driven changes in the market. A recent report by JLL stated, “investors will need to keep up with technological advances and be open to exploring the opportunities they present, or risk becoming irrelevant”.

Conclusion

The UK real estate market has proved to be an attractive destination for investors over the years. With the demand for real estate increasing globally, the UK market is set to continue its growth trajectory. Together with our new strategic partnership, we are confident to enter the UK market and bring institutional-grade real estate investment opportunities to our investors. Shojin Property Partner is a local regulated market participant who has extensive track record for originating and successfully completing real estate investment projects in the UK market. So, whether you’re a seasoned investor or a beginner, it’s time to take action and get involved in the UK real estate market.

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The geopolitical situation in Ukraine and the potential conflict with Russia had a profound effect on the Moldovan real estate market in 2022 and 2023. As tensions escalated in the region, there were notable changes in market dynamics and demand for new developments. Here are some key impacts:

Temporarily Increased Demand for Real Estate from Ukrainian Buyers and Renters: As a result of the unstable situation in Ukraine, many Ukrainians sought refuge and stability in neighboring countries, including Moldova. This led to a significant temporary rise in demand for residential properties as these individuals looked for fast housing solutions. The increased demand also drove up the prices of rental properties in Moldova, particularly in the capital city Chisinau. But in 2023 most of those Ukrainians moved on to other EU countries.

Shift in Foreign Investment: The geopolitical instability in the region made investors and local market participants more cautious about investing in areas with potential exposure to conflict. As a result, some foreign investment that might have been directed towards Moldova was redirected to other safer markets. This led to a slowdown in development projects, particularly in the commercial and industrial sectors.

Infrastructure Development: Due to the potential conflict, there was greater emphasis on improving Moldova’s infrastructure to ensure a reliable connection to the European Union and other neighboring countries. This spurred the development of new transportation and logistics facilities, further influencing the industrial real estate market.

Uncertainty and Market Volatility: While there were some positive impacts, the geopolitical situation also introduced a degree of uncertainty and volatility to the Moldovan real estate market. Investors and developers made more conservative investment decisions to minimize potential risks. This cautious approach may have slowed down some projects or limited the growth of certain market segments.

Adjustments in Down Payments: The uncertainty and market volatility caused by the geopolitical situation prompted changes in down payment requirements for reserving new apartments from real estate developers. In an attempt to maintain interest and investment, developers lowered down payments from 50% to 10-20%. While this strategy helped to keep the market active, it also resulted in cash flow issues for local real estate developers in Moldova. With less upfront capital available, developers faced challenges in financing their projects and ensuring timely completion.

In light of the geopolitical situation in Ukraine and the potential conflict with Russia in 2023, the Moldovan real estate market underwent notable shifts and adaptations. While increased demand for housing from Ukrainian buyers and redirected foreign investment offered positive outcomes, the market also confronted challenges such as infrastructure development, lowered down payments making precise and well-planned financial planning for developers a crucial requirement to avoid possible cash flow issues and difficulties in fulfilling its obligations. Despite these obstacles, the Moldovan real estate market demonstrated resilience and continued growth, as players in the industry navigated the changing landscape and responded to the evolving needs of the market.

Developments with Kirsan projects in Moldova

In 2020, our venture­ into the Moldovan real estate­ market coincided with a rapidly evolving industry that showe­d a strong direction towards integration with the European Union, le­d by its new Pro-European preside­nt and government. This create­d an opportunity to capitalize on significant growth potential due to the current level of property prices.

Great start and potential for future

During the first two ye­ars, the real estate­ market witnessed impre­ssive growth and numerous projects were complete­d successfully. The market’s fruitful fore­cast was similar to Estonia’s surge after joining the Europe­an Union in 2004. Property prices increase­d year-by-year over 25% in those two years indicating a 55-60% increase in absolute numbers, ye­t compared to other European marke­ts, Moldova’s remained relative­ly undeveloped, a factor which pre­sents opportunities for further e­xpansion.

Although we be­lieve that the marke­t will continue to develop, we must recognize­ that Moldova’s general conditions have unde­rgone some unforese­en changes in the past year. The eme­rging markets generally offe­r greater returns and profit margins but ofte­n come with reduced stability. We aimed to minimize the instability risk by choosing to work with one established developer with a great track record, instead of several smaller developers. We developed a strong partnership and everything was going well, until the escalation of geopolitical crises stunned the whole world.

Changing market conditions and first signs of issues

While there were no direct signs of any real issues in the first half of 2022, the problems started to arise in the second half of the year. The developer was facing cash flow issues, due to the changing market conditions coming from the consumer’s uncertainty. At first there were just small delays and we worked closely with the developer to help them overcome this situation.

Despite the full funding amount released for some projects according to the agreed terms, that were also presented to the investors, they requested more time and additional funding to complete the ongoing projects. Several late stages were refinanced on the platform, to give the developer more time to finalize ongoing projects. We continued negotiating and working out a solution, prioritizing the security of our investors’ capital. We needed the developer to fulfill their part of the agreements to continue in this direction, unfortunately we did not see the expected progress from their side.

Negotiations and the recovery process

We continued to negotiate with the developer, throughout this communication the developer made a lot of promises to start making the late interest payments. The last payment of interests was made in late January for the Green Park project, to cover the October and November interests. It was something that showed intention to fulfill the obligations, but later we understood that the expectation was that we continue funding projects that already were fully funded according to the agreed terms.

Our goal with the negotiations was to find a speedy solution, without extensive legal actions. But at the beginning of 2023 it became less likely that we will achieve a reasonable agreement with the developer. Since then we have been exploring legal options, working closely with law offices in Estonia and Moldova. Throughout this process the lawyers have strictly recommended us to not make those details public yet, as it could potentially harm and extend this process.

Our top priority is to find a speedy solution to this situation, and in terms of timeline, achieving an agreement with the borrower would be the fastest. But, as explained above, we are not waiting for it to happen, but putting a lot of effort and focus on the legal side of things to protect our investors capital and force Kirsan to fulfill their obligations.

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The conservative approach of Reinvest24 towards its portfolio management proved its resilience many times, even during the most turbulent ones. In fact, during the pandemic, we successfully exited many projects, earning phenomenal profits, while maintaining a 0% default rate. We were always extremely transparent in terms of sharing details about our projects and their updates. And current times will not be an exception. 

Even though we are not able to predict how current geopolitical events will proceed further, we feel extremely responsible to raise awareness among our investors about the situation in Moldova. And remind You once again how we at Reinvest24 make sure to stand and fall for your investments. 

What is going on in Moldova?

Last week, the Transnistria authorities reported several explosions to happen on its land. The Moldovan authorities are keeping an eye on developments in this area and confirm that these actions make the region vulnerable. However, The president of Moldova Maia Sandu states that the government condemns any challenges and attempts to involve Moldova in any actions that may threaten peace throughout the country.

The management of the KIRSAN group responsibly declares:

“The situation in the Republic of Moldova is calm and working. The national currency is stable and even strengthening a bit. There is an influx of skilled labor. There are several factors which leads to that, for example, job cuts in Europe and the availability of vacancies in the domestic market.”

– Sergiu Coman, Owner and CEO of KIRSAN

We are prepared for the worst-case scenario

When we were entering the Moldovan market, we evaluated different risks. Nevertheless, we are still confident about it at present time and do not oversee current events putting our investments in Chisinau at a higher risk. 

“We are sure of the security of our Moldovan projects. In fact, I believe that any development of the current situation will be an excellent real-time test of our processes, teamwork and quality of our projects. As well as the platform itself. We are strong, united and ready to embrace any change. As we are sure we did our homework properly. ” 

– Tanel Orro, CEO at Reinvest24

Our portfolio update of the Moldovan region

As per our outstanding projects in this region, the majority are sold for 95-100%. To date, none of the buyers said that they would like to refuse the purchase and lose the prepayment. Kindly bear in mind that some project stages, such as Metropolis Business apartments, Metropolis 4D and 4A developments have been extended, due to the sales process slowing down. Investors will continue to earn promised interests and on top of that – an additional +1% interest for the extension period. The information about extended stages will follow in the upcoming days and weeks.

Apart from that, we continue to successfully exit our Moldovan projects, repaying back to our investors’ principal amounts, together with profits. Recently exited project was Traian residential building stages 3-4, repaying back to investors 150.000 EUR.

How are my investments secured? 

While real estate has always been considered one of the safest or low-risk investment classes, unfortunately, there is no such thing as a completely “safe” or “sure” investment. However, we at Reinvest24 always go the extra mile in terms of securing our properties and making sure the risks are mitigated as much as possible.

We want to make sure our investors at Reinvest24 understand all the processes!

In the case of the political situation escalating further, some projects might be delayed. An absolutely healthy delay is around 2 months. After this period, additional measures will be implemented, as agreed with the borrower. If during this time the project is not repaid, most likely, it will be considered defaulted. In this case, the collateral assets will be sold and investors’ capital will still be returned. In a scenario, when the building itself gets damaged, the land will be sold, covering investors’ capital. As it always possesses value. Overall, we see that targeting construction sites does not have any strategic value, as it’s just a waste of expensive military equipment.

If You have any additional questions, please kindly do not hesitate to contact us via support(@)reinvest24.com

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A land of chocolate and watches, finest skiing resorts, and yodel? Say what you will, but years of neutrality and being home to the best banks in the world made Switzerland a golden playground. A place where the property is always coveted and investments come back. How do they do that? 

Switzerland is geographically, politically & economically unique

While not being at the center of many important events, Switzerland has always remained a standard for all. It became one of the most influential industrial & commercial centers. Many high-end corporations & organizations look to the thriving Swiss cities as their headquarters. The country is considered one of the world’s highest living standards. 

Switzerland is administratively split into 26 cantons, and each of those areas has its ownership & renting rules. Depending on the canton, different investors & different properties adhere to various regulations. But the overall conditions are favourable for outside investing. Although the lion’s share of the investors (85%) are Swiss, many acquisitions come from Britain, France, Germany, Canada and Belgium. 

Switzerland stays a steadfast real estate bet despite the turmoil of economic & geopolitical events of the last years (including COVID, Brexit, and military conflicts). The integrated monetary growth is a great sign for real estate buyers, who can be confident that the Swiss economy will be stable for the foreseeable future. 

The Swiss real estate market is unwavering!

Low-interest rates as the force of good

What are some of the main reasons for the real estate market stability, alongside the high employment rates? The real estate market situation is expected to remain consistent due to low-interest rates for mortgages. The Swiss central bank has its lowest value at -0.75% & fixed rates start at 0.5%.

The real estate bubble is safe & sound

The risk of the real estate bubble has dropped. Switzerland has left its “risk” zone for the first time since 2012. The solid Swiss economy, understandably, can withstand many trials. The average income increases faster than mortgage debt, coming in above 2% last year.

Digitalization feels right & goes right

Digitalization is also a determining factor for the real estate market, impacting future projects. According to a recent survey by Real Investment Market Trend Barometer, 97% of the investors state that project developers will have to consider the requirements of smart infrastructure (connectivity, charging points for cars, and smart energy concepts). This is one of the biggest trends shaping the market. And the most significant path is BIM or building information modelling. This technology uses a three-dimensional model of building components and processes to improve construction work.

The Swiss market does fluctuate, but the impact is minimal

92% of the investors continue to regard Switzerland as an appealing or very appealing location for real estate investments in 2022. 8% of the investors involved in the Trend Barometer study believe that Switzerland’s attractiveness as a business location will decline in the course of 2022.

68% of respondents expect investment volumes to stagnate at a high level in 2022. According to the survey participants, this can be explained primarily by the lack of investment opportunities and the economy’s slow recovery.

The COVID–19 has actually strengthened the Swiss economy

As a direct consequence of the COVID-19 crisis and the lockdown, the number of both planning construction activity applications and issued building permits declined sharply in March and April. As an additional factor, the relevant authorities in the cantons of Geneva, Fribourg, Neuchâtel, Vaud, and Ticino, ceased publishing information on projected building activity at the peak of the pandemic. Therefore, the decline in the volume of planning applications and building permits was initially heavily exaggerated. 

COVID-19 has only had a short-term impact on construction permits in the rental apartment market. While there was a 21% decline across Switzerland as a whole in the Q1 of 2020 compared to the previous quarter, much of this decline was reversed during the second quarter, with a recorded rise of 15%. 

Given this backdrop, rental apartment investments remain attractive from an investor’s perspective despite the further increases in vacancy rates.

Generally speaking, a vacancy rate of roughly 5% is healthy for a country. In the central Swiss cities, this vacancy rate is far lower than the 1.66% quoted. The vacancy rate barely scrapes 0.46% in the five largest Swiss towns. That’s why the rental prices have climbed in the major cities – lower vacancy rates equal higher demand for accommodation and higher rents.

Interestingly, the vacancy rates differ considerably between the major cities and the Swiss countryside. For instance, in the cantons of Thurgau and Solothurn, which the lack of supply had previously impacted, vacancy rates are now at an average of 3% – which is double the Swiss average. 

The Swiss investors prefer apartment living & that’s what they get

According to these stats from Crowdhouse, more than 60% of the population in Switzerland live in apartments. This means that the demand for apartments is one of the highest in Europe.

Currently, a mega-apartment project is underway in Geneva. Work began in March 2018 on a project to complete 1,000 apartments on an 11-hectare site in Vernier, near Geneva’ airport. The complex will be like a “town within a town” and include hotels, clinics, commercial space, and housing 2,500 people. It is expected to be completed between 2021 and 2023.

Due to Switzerland’s current urban living style, residential high-rise buildings are experiencing a renaissance. They seem to be the ideal product for enjoying the current lifestyle trends in Switzerland. Household sizes are decreasing due to high divorce rates, an ageing population, and a trend towards single living.

So, is Switzerland’s real estate market a neutral or a brilliant investment opportunity?

Property in Switzerland is a wise investment at the moment. Although the cost of property in Switzerland is high, demand for rental properties is also assertive. Especially those located near major centers such as Basel, Zurich, and Geneva.

We asked the locals – here’s what they think

“Switzerland has always been a safe haven for many international investors. It is due to its strong economy and possibility for foreigners to own property. In the pandemic, we see unbroken interest in housing. For the last two years, the developers have been more careful, resulting in a wider disparity between supply and demand. There is a strong need for platforms like ReInvest24 to close this gap”.

Karl Schleifenbaum, Swiss local, PropTech investor

“The Swiss government tried to cool down the market for 15 years, so the real estate prices kept rising. Before the government attempted to control the situation, there was a long period of uninterrupted increases in property prices. It all led to an overheated market. But even after this process, the real estate market in Switzerland remains an attractive investment destination.”

Peter Bachmann, Swiss local, Reinvest24 investor

Let us say it — Swiss investments are NEVER neutral & almost always positive.

Switzerland remains one of the most sought-after locations globally. It provides a high quality of life, excellent education, a favourable tax environment, and a high level of security.

Although it has a slow and steady real estate market (thanks to strict regulation), Swiss property performs very well as a long-term investment. Popular ski resorts such as Vaud and Valais are excellent rental zones and experience rapid property appreciation.

Switzerland has a low risk of political instability and it connects internationally very well. Consequently, and especially in the current political climate, a large expat community in Switzerland makes buying real estate easier for foreigners.

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Although the real estate market is considered to be one of the most stable and profitable in the world, it is also not protected from shaky “cyclones”. This is particularly evident during a pandemic that is affecting prices around the world. However, the market may change soon, but what will be the direction of changes?

Several members of the Supervisory Board of Forbes Biz shared their thoughts on the future of the real estate and how it may affect the market in the coming years. Read more about their forecasts here. Reinvest24 points out seven of them, adding some valuable comments of our CEO, Tanel Orro. 

1. Trading in Shares

According to Calvin Cooper, trading in individual real estate objects is becoming the main direction: “We are currently in the E* Trade phase of investing in commercial real estate. Next year, we will move into the Robinhood phase as real estate investments become more accessible. ”

In addition, he says, FinTech solutions are emerging and that will reduce barriers to people entering the real estate market. This makes it easier to invest in the places we live, work and spend our free time. 

“Real estate is one of the most preferred investments, but unfortunately it is not available to the majority due to the high entry barriers,” said Tanel. He added that technology is changing in recent years. “Real estate co-financing is a very fast-growing trend in Europe and future EU crowdfunding regulations will support this trend.”

2. Natural disasters

According to Deniz Kahramaner, natural disasters will significantly affect the desirability of real estate and shape its price. California forest fires, for example, have seen a sharp rise in fire insurance rates for homes near the forest. This is particularly the case in areas with flammable forests, such as eucalyptus. In the United States, real estate prices in Texas, Florida and Louisiana are also affected by hurricanes. 

According to Orro, the European and especially the Baltic real estate market, where Reinvest24 projects are located, will not be significantly affected, as the probability of natural disasters is significantly lower.

3. The Secondary market revitalization

As the population grows, it becomes increasingly important to modernize outdated neighbourhoods. Thus, according to Anne Keshen, it is important to renovate commercial premises and build new ones instead of the houses left on time. “It’s a good opportunity for investors and developers.” 

“A very good example of this is the Kalamaja and Rotermann area, which has taken on a new look in the last ten years,” Orro gave the example of Tallinn, Estonia. This trend is continuing and some other regions are expected to undergo a similar change in the near future. ”

Read also about 5 Things that increase the price of your investment property

4. More smart homes

Kori Covrigaru noted that the use of smart technologies in the real estate business is on the rise. This direction is also increasingly preferred by investors who make 3D virtual tours of their objects. “I think in five years’ time you can make a 3D tour of every property, which is also good for marketing purposes.” 

Orro agreed that technology creates new opportunities and makes life easier. For example, in his opinion, 3D tours are a good way to get a good overview of real estate without leaving home. However, he does not recommend deciding on a purchase based on this. “Be sure to check the property on-site before buying!”

5. Mixed-used zoning

Jacob Bates predicts that mixed-use zoning will be the biggest trend and asset class. “The reuse of assets has turned hotels into living quarters, offices into mixed-use commercial premises, parking spaces have become warehouses, and retail spaces have become living and working environments,” he said. The repositioning and repurposing of existing assets will be a tremendous value-add investment and project for years to come. 

“An old factory building in the right area could be a perfect office building for start-ups to use,” Orro added. Although it all seems very simple and profitable, it can actually be very complicated and require more time and money than originally planned. “Especially when the ultimate goal is to turn an old building into a modern living space, commercial space is a little easier.”

6. Use of digital currency in real estate transactions 

Bitcoin is probably the next “big deal” in real estate at any level. According to Sherman Ragland, there will be tenants as well as buyers willing to pay in digital currency and sellers willing to sell in digital currency. “Find people who understand the connection between real estate and digital currency. Make it clear before you start trading digital currency. ”

According to Orro, it will probably take some time to get there. Mainly because, for example, banks would have to agree to the deposit being made in digital currency and notaries would have to verify the transactions from crypto wallets instead of bank accounts.

7. “Cash” offers only

“Increasingly, investment firms are offering sellers so-called active loan-free deals. This means that the purchase is no longer financed by the bank loan, but the buyer has the entire amount”, explained Kevin Markarian. 

“Currently, You can’t buy real estate by cash in Estonia, but there are more and more real estate transactions that do not involve the bank anymore. In other words, the buyer has the entire required amount in the bank account, ” explained Orro. The main reason for such transactions is rising inflation, against which there is no protection,  therefore the free money is invested in real estate.

“By buying with a bank loan, you undertake to service the bank loan. If this obligation is not fulfilled, the bank will take away your real estate and sell it promptly, losing 10-20 % below the market price. ”

Simply put, the risks of buying real estate with a loan are higher. “When renting it out, the rental income only serves the loan for a long-term home loan; for any other type of loan, your monthly rental income does not serve the loan and you have to pay extra,” Orro explained.

It may happen that even if You have a tenant, in case of buying with a loan, the cash flow is generally negative.

In a worst-case scenario, if the tenant disappears or simply decides not to pay, there will be a monthly hole that you will have to fill. “If it is no longer possible to fulfil it, the bank or You should sell it in a matter of urgency.”

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With the international real estate market dwindling, barely surviving the 2020 COVID-19 pandemic, and still very much struggling in 2021, the Moldovan real estate market, the underdog that it is, somehow managed to thrive.

Here is why you should look into investing in Moldovan real estate in 2021 – it’s getting stronger by the day.

People return to their old selves but have clearly reevaluated the worth of almost every aspect of life. You heard it at Reinvest24 first – we are offering – and encouraging – to catch the tidal wave of the respawned Moldovan real estate market.

What changed post-COVID-19?

Don’t get us wrong, it’s not that Moldova hasn’t suffered since the COVID-19 struck – it did, and the economy was hurt pretty bad. It simply is recovering better and more vigilantly than any other market in the EU.

For the real estate market, the pandemic fully ended in June 2021. Consequently, the surge in the number of transactions could already be seen in March and April, but in May, the growth becomes steadier, and by June, it has already surpassed the figures of previous years. This is because the buyers have become as active as they used to be in the pre-crisis period.

But before the said crisis, the market was dwindling slightly – there was no constant to which all the factors adhered. There was a stream of new residents from the suburbs and the villages who wanted to live in apartment buildings. There was a stream of townsmen pouring back into the suburbs. And the majority of the people were renting rather than buying or taking mortgages.

COVID-19 has changed the mentality – hence it changed the demand

The pandemic had changed the game – since the government enforced the quarantine, all types of individual homes, housing in condos with a large common yard, and apartments with terraces are in mad demand. Many tenants, off-put by the way the landlords tweaked up the prices, turned into homeowners in the matter of half a year.

What type of real estate do Moldovan buyers prefer?

During the pandemic, the demand for individual houses increased by 10%, and more than 440 homes have already been sold in the first half of this year. Compared to 2019, the demand for apartments with balconies\terraces has also increased.

Two years earlier, 29.7 thousand transactions were concluded in 12 months. Meanwhile, only the first quarter of 2021 has seen 7.6 thousand transactions for the apartments purchase in Moldova. If the trend lasts, 2021 will be the year to beat all records in the real estate market, with sales being 30-40% higher.

2021 can bring 30-40% more in real estate sales

Individual houses, compared to apartments, balcony or no balcony, cost on average 10% more. And the prices for secondary housing in apartment buildings are falling. This is also due to the change in priorities that arose among buyers after quarantine.

Obviously, a house with a garden is a coveted place during the quarantine, and the secondary living residences are less likely to have a balcony or terrace. In addition, the common yards, which are an advantage for new condominiums, are a flaw in the old buildings. Those yards are typically neglected, and children’s playgrounds are used as parking spaces.

Another flip occurred in the buyer’s family attitudes. In 2000, three- to four-room apartments were popular, and only 9% of apartments had 1 or 2 rooms. In the last couple of decades, Moldovan people longed to have families, children. As a result, most households had three or more people.

After COVID, many people prefer to delay having children until after their 30s, if they decide to have them at all. Many even prefer to stay single altogether, choosing the safety of a secluded life. Not to mention, the divorce rate also spiked in 2020.

This led to smaller apartments rising in demand, leading to the construction of multiple apartment buildings with only one and two-room flats. This is a huge plus for construction companies because these types of projects are easier and safer to develop. At the moment, small-sized apartments make up 83% of all the housing options available on the market, and the living area has decreased from 130 square meters to 60 square meters.

Primary vs. secondary housing in Moldova

Keeping in mind the points from above, the change in the preferences over new and old spaces becomes obvious. Before, most buyers chose primary housing – in 2021, about 35% of buyers acquired new apartments in new buildings, and the remaining 2/3 fancied secondary housing.

Residential real estate in primary markets in Moldova is typically 50% more expensive than the secondary market apartments. Therefore, people with lower income, which are the majority, prefer more affordable housing options. This explains the increased interest in secondary real estate, which is observed in the first half of 2021 – more and more people want to buy, regardless of their budget, to stay secure within their residences.

How did the pandemic reflect on the real estate affordability?

In short – positively. Another evidence of the crisis was the change in costs – in fear of missing out, real estate agencies have dropped the prices, meeting the need of the growing buyers base. In 2008, the square meter in a freshly built apartment was about 900 euros, while the secondary property cost twice as much. During the global crisis of 2008, property prices fell all over the world, and in Moldova, this process took 12 years. Now, a square meter for secondary real estate is in the realm of 500 euros.

Previously, it took up to 40 years for a new family to save enough to buy a living space. In 2021, one can buy an apartment in 15 years (these data are calculated based on the average annual salary, which, according to statistics, is about 5000 euros). Thus, it is now enough time for a person to accumulate the full amount or close the mortgage.

It now takes 15 years (roughly 60% less time) to buy

Speaking of which – mortgage conditions have also changed, playing into the affordability factor. Since 2018, the average interest rate below 10% enabled more people to acquire real estate without one’s budget drying out. And the buyers took it gratefully. Among the many favorable factors, there are also various supporting measures that the government has introduced to encourage people to buy housing rather than rent. The Prima Casa program, for example, favors young buyers and offers many privileges, as well as extra-low interest rates (6,63% annually). These measures and the natural shifts of the market led to the overall Moldovan mortgage loan portfolio adding up to 4 million euros.

What are the real estate price dynamics in Moldova?

As mentioned before, during the pandemic year – 2020 – the prices took a dive, but they are recovering well. Reinvest24 covered the situation on the Moldovan market in 2020, so you can see the differences firsthand. Real estate prices in Chisinau increased by 4.2% compared to the fourth quarter of last year. At the moment, the residential property price index (RPPI) is 118.9%. The cost of housing in the primary market grew by 3.8%, while the secondary market grew by 2.2% – just in the last few months.

The price range per square meter in a new building varies from 458 to 905 euros, depending on the city area. The most competitive options are located in neighborhoods like Otovaska, Airport, and Staraya Poshta. The city center, on the other hand, stands out for the highest prices.

The secondary market, known for being pricier throughout the years, is now estimated lower than the primary one. Secondary housing prices are in the range of 368 to 673 euros per square meter. The distribution of prices by neighborhoods is similar to the primary market. The number of rooms in an apartment also affects the cost – the more rooms, the more favorable the price per square meter.

How is the real estate market spread in Moldova?

The majority of real estate purchasing opportunities – hence, the investing ones, too – are concentrated in Chisinau, the capital. We at Reinvest24 have several major projects in the city – which you can invest in – it being a big value city on the European market.

Previously, 40% of housing sales were accounted for in the regions and smaller towns of Moldova, and 60% were in the capital.

Now, 80% of apartments and houses that are offered for sale are in Chisinau. Financial gurus explain this shift with the growing immigration flow from Moldova rather than the pandemic, but the trend has surely grown in the last years. Part of the population leaves the country, while the other part moves from other districts to Chisinau.

For investors and construction companies, this is a blessing. First, the properties in the capital are much easier to control and maintain. Secondly, it already has all the infrastructure for comfortable living, cutting the cost of making commercial spaces from scratch. And finally, since the biggest population flow is centered in Chisinau, any new accommodation will remain in high demand.

So, why is the Moldovan real estate market a field of dreams now?

With all the lack of stability that is now on EU real estate investments markets, the tiny sanctuary of Moldova is – rather unexpectedly – on the rise. We’ve already talked about seven reasons to invest in Moldova, but now it’s even more true – and promises to be much more fruitful. Both the prices and the demand are growing, making it THE market to invest right now, with a sure shot at gaining may more than you give.

We covered the how’s, and now it’s time to answer the why’s:

• 2021 could very well break the real estate sales records
• Purchases of individual houses increased by 30%
• Individual houses prices rose by 10%
• 80% of real estate are now concentrated in Chisinau
• The mortgage loan portfolio is almost 4 billion euros
• 83% of newly-built accommodation consists of smaller apartments

The Moldovan real estate market had proven its stability and sustainability, coming out on the other side of the pandemic of 2020 stronger than any other. So whether you’re ready to buy a property or want to invest as little as 100 euros in 2021, Moldova is a solid – and resourceful – way to begin.

The post The‌ ‌pandemic‌ ‌turned‌ ‌the‌ ‌Moldovan‌ real‌ ‌estate‌ ‌market‌ ‌into‌ ‌a‌ ‌field‌ ‌of‌ dreams‌ ‌-‌ ‌how‌ ‌& why?‌ appeared first on .

Last week we published our very first rental project from Germany, thus adding the 5th country for investing in secured real estate projects. We believe You are curious to know more about why we did it and what potential we see in this market. Sit comfortably, as we are about to shed the light on the German real estate market and its peculiarities to take advantage of. 

Ein wundervolles Deutschland – growing economy

For many years in a row, the market is remaining to be stable and even growing, only from time to time facing minimal decreases. We can see this proven in the growing activity in the residential property sector. 

The CBRE in its 2021 Real Estate Market Outlook report for Germany said, “Activity in the German residential investment market can be expected to run at an uninterruptedly high level in 2021.” Deutsche Bank AG also supports it in its German Property Market Outlook 2021 report: “The cycle is likely to remain intact in 2021 thanks to the low-interest-rate environment, fundamental supply shortage and current undervaluation.”

Many industry experts also say that this rise is a delayed response to a long period in which Germany has not built enough. After the mid-1990s there was a substantial drop in housing completions, which was partly caused by changes in the policy, such as a rise in VAT from 3% to 19% in 2007, and the abolition of owner purchase subsidies.

The one is clear – the housing supply is not keeping up with the demand. Dwelling permits increased 3.8% y-o-y to 360,578 units in 2019 and by another 2.2% to 368,400 units in 2020, following y-o-y declines of 0.3% in 2018 and 7.3% in 2017, according to Destatis – insufficient to meet surging demand. According to HDB President Thomas Bauer, The country needs to build around 400,000 flats annually to prevent housing shortages in cities.

Better rent than buy

Following Switzerland, Germany has the second-lowest share of homeowners of all OECD countries, as only about 45% of households own their home. Only in Berlin, About 1.45 million apartments are rented, as for 2018. 

There are many reasons why people living in Germany give preference to renting, rather than owning their own apartments. 

Of course, homeownership brings great benefits, such as a sense of stability, belonging to a community, and pride of ownership. It is common for Germans not to buy homes, but rent. Buying your own property requires a lot of capital. And Germans have a better idea of its use, as the majority are avid investors. They give preference to investing their savings in more liquid asset classes, thus profiting more. It is also common for Germans not to buy homes but rent them. Maybe this is the reason why Germany is the country with the best financial education and a high number of private investors. 

Besides, the overall cost of homeownership tends to be higher than the overall cost of renting. That is true even if the monthly mortgage payment is similar to (or lower than) the monthly rent. 

All roads lead to Berlin

Taking into account that our first project is located near Berlin, let’s now look at what is going on in this particular region. 

Germany’s capital city is the 7th most inhabited urban area in the European Union. The young population and growing reputation as a European creative and media hub boost the city’s residential sector. It hosts several world-known universities, museums, entertainment venues and other creative industries. But again we see the same trend – the demand is exceeding supply. 

One of the most stressful things about moving to Berlin or within the city is flat-hunting. Not only is there a lack of homes, but new rental contracts are often ridiculously high – or tenants should pay too much through a sublet because they can’t get their own place.

According to JLL’s forecast, Berlin requires about 18,500 new apartments annually until 2030 to address the severe housing shortage in the city. And the introduction of a rent price cap (Berliner Mietendeckel) last year is expected to exacerbate the situation.

As per the price, we observe 2 trends overall. The rental segment of 5 – 8 EUR/m² has been getting smaller and smaller with a declining overall volume for years, while the rental segment above 14 EUR/m² is taking up more and more space. 

Speaking about the rent price cap, this is something that needs special attention. 

The Berlin rent cap explained

The Berlin rent cap has been one of the most debated laws in Germany over the past few years. 

On January 30, 2020, Berlin adopted a law to freeze rents in the city, which came into force on February 23, 2020. The rent cap covers all residential space completed before January 1, 2014, with rents frozen at the level of the rent on June 18, 2019. The law prohibits rent increases until 2021 with monthly maximum rent fixed between 3.92€ and 9.8€ per square metre, depending on the year of completion and the standard of the residential property. Rent increases of 1.3% per year should be permitted starting 2022. The goal of this law was to reduce the burden of housing costs for many and overall make housing more affordable. 

Besides, many cities around the world have some kind of rent control measures in place. And theoretically, everything should be working just fine. However, Berlin’s rent cap law became unique. It meant that rents for 90% of Berlin’s apartments were frozen for 5 years at the level they were at in June 2019. New rental contracts could not be above that level, and as of November 2020, any existing rents that were still above that level had to be reduced.

In addition, after more than a year of reduced rent costs, Germany’s highest court announced in April that the Mietendeckel was unlawful, resulting in tens of thousands of people being plunged into debt and facing rent increases in the middle of Germany’s third wave of the pandemic.

Undoubtedly, the current status is not the most pleasant, however, as You know already, every crisis comes with an opportunity. New changes in the law already triggered many people to reconsider their accommodation and look for rental opportunities outside Berlin. And this gives the potential for growth to cities like Eberswalde. 

We asked the locals

The majority of our investors come from Germany. Therefore we approached some of them and asked about their feelings towards their local market. And here are some of the answers:

1. What is your opinion of the German real estate market?

“The market is booming. Prices have risen considerably in the last few years.” – Claus Lehmann, P2P-Banking

“For a long time, the real estate market in Germany was comparatively favourably valued compared to other countries. However, this situation has changed. Prices have been rising continuously for around 10 years. Germany has many very different regions. This makes this market very challenging. There are boom regions and regions with rather shrinking populations. In my opinion, the market is quite stable and quite solidly financed.” – Dennis Uliczka, Capital-Insider

“In large parts, I think the real estate market in Germany is overpriced and overregulated.” – Luis Pazos, Nurbaresistwahres

“The German real estate market is certainly not easy. For example, rental yields in all “A” cities have fallen massively due to the significant increases in property prices. In some cases, yields of barely 3% are still achievable. In addition, there is the country-city and regional transformation. Some regions continue to experience outward migration, others inward migration. And the cities are also seeing more in-migration, while the countryside is shrinking. In other words, a property in the wrong region or in the countryside has a higher risk of falling prices. And of course also in terms of finding new tenants. In addition, one must not forget that there is very good tenant protection in Germany. On the other hand, there is the belief in German “Betongold” (concrete gold).” –  Thomas Butz, P2P-Game

“From the investor side, it looks more “near” & “familiar” than investing in Real Estate projects abroad. It is also nice to see that projects in Germany have a similar interest rate to projects in the Baltics. “ – Lars Wrobbel, Passives Einkommen Mit P2P

2. What do you think about the Berlin rental cap?

“I don’t think it’s a good idea to cap rents directly, because that would put the brakes on housing construction and further investment. A rent brake, on the other hand, I think is acceptable and sometimes even appropriate to limit speculation at the expense of tenants. Similar practises happens in Hamburg, for example.  This would also allow landlords and housing associations to calculate sensibly.” –  Thomas Butz.

“Personally, I think it is the wrong way to address the problem. It will only lead to fewer new houses being built thereby intensifying the scarceness instead of solving the problem.” – Claus Lehmann.

“In my view, it would make more sense to focus on other solutions to the housing shortage in Berlin and other cities: More supply of affordable housing. It would make sense to provide more support for property developers, to build more apartments and also to revitalize existing empty properties. And approval procedures should also be accelerated significantly. Better framework conditions can solve many problems in this case.” – Dennis Uliczka.

3. Are there any insights related, you would like to share?

“In Germany, the surrounding areas of larger cities are becoming increasingly interesting (the so-called ‘Speckgürtel’ in German). Here, prices rise because many people now have more opportunities to work remotely and live outside the city, where it is cheaper. In addition, you get more living space for less money. In smaller cities around Berlin, Hamburg, Stuttgart or Munich, to name a few examples, we can observe these effects. By the way, sometimes the settlement of just one company is enough. And a region and its real estate market booms. We may soon see this effect when Tesla opens its factory in Grünheide (Brandenburg) near Berlin.” – Dennis Uliczka.

“A big part of my portfolio contains Real Estate, but I am not owning a single one and also don’t plan to change it. Like loans in P2P, I invest in big REITs and diversify my Real Estate part into thousands of different pieces. In general, I see Real Estate is a great tool to generate a stable and steady income.” – Lars Wrobbel.

“I prefer to invest in many different properties in order to spread my risk massively. I prefer to make many smaller investments rather than one large one, where I then bear a higher cluster risk. That’s why I think the approach taken by Reinvest24 is very good.” –  Thomas Butz.

Coming back to Reinvest24 plans

We were looking in the direction of the German real estate market for quite a long time. With Germany, It took us over half a year to negotiate our first project and agree on the terms. To be honest, Germany always was one of our main countries to expand our operations to, but we were waiting for the right time to come. At the moment, we have a local representative, who will arrange the project’s legal part and manage the project itself. Apart from that, we are looking forward to finalizing the establishment of our international branch in Germany. Our goal is to be fully compliant with local regulation, become closer to our german investors and maintain the same outstanding quality of the projects offered.

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Over centuries, the intriguing charm of Spain has stolen many hearts. Its beautiful beaches, impressive architecture, delicious food, famous landmarks and very rich culture, makes this country an appealing destination.

So is Spain’s real estate market. However, It is always important to learn more about the market where You plan to make long-term investments. In this article, we briefly share the highlights of our insights on the current market situation, the latest statistics available and trends for the coming year.

COVID -19 and its economic impact

It is not a secret that the recent health crisis left an impressive consequence on all of the world. And Spain is not an exception, as tourism is one of the key drivers of Spain’s economy – 12.4% of GDP. In fact, Spain got the biggest hit among the countries in the eurozone with punishing figures for GDP last year (see the screenshot below).

Also, take a look at this panel of Economic indicators.

As of now, Spain can be considered to be in a recession stage and it is likely expected that it will not return to pre-crisis levels until the end of 2022. However, Caixa Bank researchers state that despite the seriousness of the situation and the high uncertainty regarding how the pandemic will develop, the sector is supported by a much stronger foundation than in the previous crisis of 2008. Before the outbreak of the COVID-19, the financial situation of Spanish households and companies in the sector was healthier than back in 2008. Moreover, the number of new properties being built was not excessive in relation to the demographic trend. Banks also have much better solvency and liquidity ratios. All these factors make experts more confident in the sector’s ability to weather the current crisis.

When it comes to investing, the recession always comes with opportunities. The best time to buy real-estate is when there is an uncertainty on the market and there are not so many buyers. In this article we shared more insight on why you should use the financial crisis situation for your convenience in terms of wealth building.

Demand for the properties

Regarding domestic demand, the APCE (Association of Promoters and Constructors in Spain) has already put forward a demand to the Government, together with other incentives, for the reduction of VAT on newly built property from an average 10% in most areas to 4%. It is expected that those actions will positively improve the demand in the real estate market.

As per the past year’s sales transactions, you can see from the chart above, which compares sales with last year, 2020 got off to a modest start before plunging in the lockdown months of March and April, then started to recover in May. Pent up demand ensured sales growth in the third quarter, but the figures for October, with sales below last year, suggest that the bounce is over. Year-to-date (10 months) the home sales are about 20% smaller than they were in 2019, with the difference built up in March-May 2020.

Construction industry in 2020

According to Idealista, during last year, the construction industry suffered enormous economic losses due to the work stoppage. Although the stoppage lasted only a short period of time, once working activity resumed, production was cut by 20%. This created a deficit of supply with demand jumping back to previous year levels.

Also, the job losses in the sector impacted the workers in the construction industry in Spain. It has decreased by 65% in relation to the same period in the previous 2 years. The cities most affected by this situation are Madrid, Barcelona, Malaga and Alicante as they are the ones with the highest construction activity in the country.

Price bubble in real-estate

According to the data, provided by Statista in November 2020, the real estate bubble index arranges Spain in a bubble risk-free zone. It means that Spain’s real estate market is not overheated and still has room to grow in terms of prices. Also, the price rise is stable and people are not making emotional purchases of the property. For example, Madrid’s index is 0.43, which is below the index median score of 1.5.

Trends to expect

As per the trends to expect, Colliers Spain states that in 2021 build-to-rent will be an investment opportunity in provincial capitals and other consolidated urban areas with demand. With that being said, Madrid remains to be the most dynamic housing market. Whilst Barcelona is suffering the negative effects of government intervention, making Valencia city an attractive alternative to Barcelona for investors.

Also, S&P estimates a rapid rise in house prices in Spain which will reach 1.8% already in 2021. It’s worth noting that a 1.4% price drop is nowhere near the plummeting rates seen in Spain in 2014 during the height of the previous financial crisis, where properties cost 35% less on average than in 2008.

By 2022, Standard & Poor’s expects a sharper rise still in terms of house prices in Spain – up to 4.5%. All this means that within the space of one year, house prices in Spain will experience one of the biggest price fluctuations (fall to rise) of Europe’s main economies, from a 1.4% to a 4.5% rise.

Best time to invest in Spanish real estate?

Currently, the Spanish real-estate market went into the ‘healing’ phase of the real estate market at some locations. The properties in Barcelona were clearly having some ‘air’ in their prices, which is being let out now. While this is a painful process for some participants of the market, it definitely has a healing and positive long-term effect on the Spanish real estate market in general.

Our numbers show that Valencia, being undervalued compared to Barcelona or Madrid now is becoming more popular and is gaining momentum. Its close location to the seashore, strong transit and logistics industries, the Valencia Community size (5.5 million), which is larger than Barcelona (4.8 million) and a bit smaller than Madrids (6.6 million) make it a great place for entering Spanish market. With construction costs between 1000 and 1300 EUR/m² and real estate selling price between 1400 and 1800 EUR/m² we also don’t see a bubble on the real-estate market that might still be present in some other countries.

Invest in Xirivella, our first spanish project

At the end of 2020, we published our first project from Spain offering an outstanding annual yield of 15.8%.

The key benefits of investing in this project are the fact that it will be fully developed and managed by the Reinvest24 team, in partnership with an experienced construction company – Kirsan Holding. Also, we see great potential in this property, as the demand for modern new apartments in the area is high due to low supply. It’s an old city covered with historical buildings, leaving less room for new developments. The unfinished building will come at about 450 EUR/m² and the average price for the sale of the new construction now is around 1400-1600 EUR/m².

More information about this project is available here.

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If you are hunting for hidden gems in the European real estate investment scene – look no further. Reinvest24 offers a unique crowdfunding investment opportunity – real estate development projects in Moldova. Currently, there are several projects available for investing – a shopping center and two stages of a residential development loan. Moldova is an exotic real estate investment destination despite its proximity to the European Union. However, we see it as a country with great growth potential and a vibrant real estate development scene. We listed 7 reasons that make Moldovan real estate an attractive addition to your portfolio, but there are many more!

1. Political Paradigm

Moldova has gained independence from the Soviet Union in 1991 and ever since have been oriented pro-Russia in its foreign policy decisions. Russia, however, has lost its strategic appeal to the Republic of Moldova after the imposition of economic sanctions. As a consequence, the Moldovan government decided to “look West” and to adopt more market-friendly reforms. As evidence of that in 2019 in nation-wide elections the communist party for the first time since 1991 was left out from entering the parliament.

2. Association with the European Union

Besides that, Moldova have signed the Association Agreement with the EU in 2014. The agreement has come into force in 2016 and established a “Deep and Comprehensive Free Trade Area” (DCFTA) which offers zero-levy export for agricultural products. This is important for Moldova, where more than 30% of the total population are employed in the agricultural sector.

The association with the EU is facilitating strengthening the rule of law and democratic standards in the Republic of Moldova. The European Union is assisting Moldova in the fight against corruption, which is one of the core political problems, by financing special anti-corruption programs. Besides, the EU supports the job creation and development of the regions in the Republic of Moldova.¹

3. Impressive GDP Growth

The GDP growth of the Moldovan economy has been remarkable, one of the highest rates in Europe- over 4% in 2016-2018. In 2019 the GDP has grown by 3.6%. The global pandemic, of course, has affected the expected GDP figures, just like all over the world. Pre-pandemic 2020 Moldovan GDP was expected to grow at a 3.8% rate, however, due to the crisis, the baseline GDP estimates have lowered. Let’s see what eventually the figures will show, but hopefully, the world economy will be able to bounce back.

4. Low Prices on real estate

The average price per sqm in Chisinau is very low when comparing to any other capital on the European continent. The construction costs are higher than this in the majority of countries. The price per square meter was only Eur 533 during its peak in July 2019.

Due to global shock caused by the pandemic the price per square meter has fallen to Eur 506. Many local real estate experts think that the price will not decline further dramatically, as this is a logical course of events to the temporary closure of the economy, leading to lower activity in the real estate sector as well. Housing Affordability Index (ratio of price of the property and income) tells us that buying a home in Chisinau is more affordable than in any European country. This will too have a positive effect on the property prices.

5. Homecoming

The crisis that has been caused by the outbreak of COVID-19 has harmed the economic growth, however, there are some positive sides too. One of the pains of Moldova is the emigration of working-age citizens. According to the population survey conducted in 2019, the population in Moldova was 2.68 million people, a decline of 6.6% since the previous survey in 2014. The working immigrants are earning for their families abroad and sending money back to Moldova. In 2019 the repatriated funds by working citizens abroad have amounted to $1.2 Billion.
The global pandemic has brought home many working immigrants, who eventually might want to stay in Moldova. Moreover, all the earned money abroad is brought and will be spent in Moldova. Reimmigration will boost the demand for homes and will be positive for the investors in the real estate sector.

6. Internal Migration

Overall Moldova was losing the working-age population due to their immigration abroad. The capital Chisinau, on the other hand, always benefited from internal migration which has supported the demand for new homes. In 2019 there were 22,187 home sales in Chisinau (a 40% increase from the previous year). In 2019 the construction of the residential homes has increased by 63%, when comparing to 2018. Moreover, in 2019 the approved mortgages increased by 25% to 10,385, comparing to 8,255 the year earlier. Commercial real estate is in demand too. Mainly driven by foreign companies, which acquired around 35% of the available commercial office space in 2017-2018.

7. Prima Casa

The government program “Prima Casa”, which literally translates as “First House” is helping employed citizens who reached 18 years old to buy their first home, financing the initial deposit required when getting a mortgage. Overall the government has already contributed Eur 112 million as part of the program helping 4,296 households. The good news for the real estate sector is that on the 21st of May 2020 the government has increased the upper age limit for qualified customers from 45 to 50 years old.

The effects of such financial assistance programs mirror in the increasing prices for the real estate, so don’t lose your investment chances while the prices are still low. In Latvia, a similar program has been launched in 2015. As a result, property prices have increased, especially in the capital during the first three years of the program existence.

Effects of the COVID-19

The Moldovan Prime Minister has decided to reopen the economy, because “Moldova has no other choice”.

Despite of that, the real estate sector expects to suffer less than other sectors of the economy since the construction sites didn’t stop their work. Economic experts don’t expect a substantial decline in prices, as Moldova real estate development companies can afford to wait until home-buyers feel comfortable buying the property again.

The expansion of the age bracket of the qualified citizens for the government program helping the first house “Prima Casa” will have a positive effect on the demand side.

Why invest in Moldova right now?

Moldova is strategically placed linking large geopolitical blocs such as CIS (Commonwealth Independent States), Europe, and the Middle East. With the help of the European Union, the Republic of Moldova is adopting the policies aiming at modernization of the economy, as well as fighting corruption and strengthening the rule of law.

Thanks to the adopted measures the economy of the republic was growing at a fast pace, which has interrupted because of the global pandemic. The real estate sector, on the other hand, will see fewer negative effects, so investing in modern buildings in the capital is a great addition to the portfolio. Moldova real estate investment projects listed on the Reinvest24 will not only bring you the diversification but also will increase your overall return since we are offering a 15% yield.

Investing is risky, especially in unknown territory. However, as we have shown you in 7 points, real estate in Moldova is especially attractive right now as we think it is undervalued. Of course, the changing economic and political picture, “spiced up” with the global crisis is making it too adventurous to buy the whole property in Moldova. However, contributing a smaller amount and buying a share with the help of a crowdlending platform is definitely an opportunity not to be missed.

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