The real estate markets in Europe and the US are attracting investors and activists, since the conditions of the Israeli real estate market, with its instability and fluctuating yields stemming from the lack of stability of regulation, make investors look away, abroad.
Going into international markets involves many factors. First and foremost, it is the selection of the market in which we want to focus our investments. In each of the markets, we will examine the extent of the market risk, expected levels of return and the manner in which investments are actually made – issues related to registration, work with local companies, regulatory requirements and taxation. In addition, the economic conditions prevailing in the markets should be examined in depth, and the investment horizon should be examined – to what extent the markets will grow and lead to growth in the residential real estate market and income-producing properties.
We will examine the major markets that are gaining dominance and popularity among investors in Israel – the United States and Germany
Risk level in the market – the US market, continuing trends of growth. Employment rates are climbing, and the market is experiencing a consistent decline in unemployment rates. The recovery from the real estate crisis continues, along with consistent growth rates and increased investment in infrastructure and assets. The German economy is the most stable and growing economy among all European economies. It attracts the European market and the results of the German economy affect the amount of investment in real estate and the amount of money available to the Germans to purchase residential apartments and investment property. The German economy serves as a lever for rapid growth in large urban centers and generates demand for residential purposes both for purchase and rent. These markets continue their growth pattern.
Yield. The crisis of 2008 caused a sharp drop in prices and a significant crisis in the real estate market, most of the real estate assets lost their value and the US market entered a process of recovery from a significant crisis. Purchasing power in the United States was damaged and many property owners had to realize assets, for liquidity reasons or due to default. From the perspective of investors, it is an interesting opportunity to purchase assets below market value. The impact of the crisis is still felt today. The German market, as well as the European markets, still enjoys relative stability over time, and therefore the level of yields and the value growth of assets is more gradual and long-term.
Data availability and economic information are also available to entities that provide financing for the purchase of real estate assets in the United States and Germany. Information on real estate assets, business history, environmental conditions and prices of similar transactions is readily available. The same applies to market players, the state of companies and their stability, as well as the regulatory infrastructure – the relevant types of legislation, the restrictions applying to assets, current and future planning, and the ability to assess the risk level of the transaction as well as the level of risk and reliability of the tenants, and to make informed decisions, reduce risk and avoid surprises.
Asset Diversity for investment. The US real estate market is very diverse in terms of the types of assets available for investment, including residential properties, multi-family projects and a wide range of commercial properties, as well as investment in real estate companies and funds specializing in the acquisition, management, And housing in various parts of the US. In the German real estate market, preference is given to residential real estate, and growth and employment rates, coupled with the shortage of housing for rent, drive prices and yields upward, while the preference of tenants and regulation reduces the level of return in Germany. Typical German tenant will be interested in long term rental and therefore in long-term contracts. This is recognized by German legislation which tends to favor renters and tenants thus creating a long-term rental market.
Regulatory infrastructure – In comparison to the US market, the real estate market in Germany also enjoys a high standard of acquisition and asset realization, as well as regulation and supervision of property leasing contracts, which makes it easier to execute real estate transactions and investment in yielding assets. Unlike the United States, the tax regime in Germany prefers long-term investments and gives relief to property owners who hold the property for a long time (over 10 years). It can be said that legislation and taxation in the United States make it easier to quickly realize assets, as opposed to Germany.
Interest, yield and growth. Germany is a preferred destination for many European and Russian investors, who recognize attractive price levels, especially compared to other investment destinations such as London and Paris. The combination of stability and growth in Germany, enable investors to make long-term investments and low risk relative to other European countries. The United States is a very large real estate market primarily for local investors and real estate professionals. In contrast to the European market, where zero interest rates do not leave many choices for investors, foreign and domestic investors in the United States enjoy a greater selection of investment channels.
In addition to comparing these factors, it is also worth considering factors such as time difference and ease of arrival, differences between the investment horizon and the duration aspect. It is also important to remember the differences between the different economies and working in Euros versus the Dollar. Many investors will also consider cultural differences that may play a role, especially for Israeli investors.