The first step to investing successfully in property is to determine the nature of the project: is it only a financial investment or is it a lifestyle investment too? If it is a lifestyle investment, what personal or family goals should it support? Consider details such as restrictions of use as well as the potential for appreciation over a specific length of time.
If an investor is buying for financial reasons, is the investment based on income returns and yields or capital growth? It is critical to understand whether a property will be well positioned in the current and future rental markets in addition to factoring in operating costs and fees. Investors may require investments that will enhance residence or preferred immigration status.
Let’s Be Diverse
Following a diversified and balanced approach to investment is generally advisable. The advantage of this is that assets are spread out across markets, currencies, and economic cycles, so balancing potential risk. At present, ultra-high-net-worth-individuals (UHNWIs) from Germany are investing strongly in Barcelona, Lisbon, Madrid, and Mallorca, while UK-based UHNWIs have commercial property investments in Germany at the top of their list. Buyers in China prefer certain areas in Hong Kong due to their reputations, facilities, and locations. In Paris, international buyers from Italy and the USA currently dominate the market. An upswing in investors from the Middle East is also noticeable in the French capital.
Special tax regulations might also encourage individuals to invest in real estate. For instance, Italy introduced a special tax regime in 2017. It is intended to attract Italian and foreign investors who have resided outside the country for at least nine of the previous ten years to transfer their tax residence to Italy and pay a fixed amount of EUR 100,000, instead of the regular Italian income tax, on their income from foreign sources. In terms of taxation, it is important to know whether an investor plans to use a property as a second residence after relocating or rather proposes to rent it out. This decision, made at the time of purchase, will determine the taxation that applies during the period of ownership and at resale.