International real estate market essay
International real estate market is one of the most attractive investment options for SMEs. Although the market itself is perceived as one of the most secure ones, there are both risks and opportunities associated with emerging real estate markets. Emerging markets became more attractive for SMEs after the U.S. housing crisis of 2007-2008 (Howard, 2010). However, taking into account higher risks associated with marketing strategies and policies in emerging countries, the optimal strategy for SMEs is to diversify their real estate investments or to purchase real estate and resell it in the short- or medium-run period. It should be noted that many countries have favorable regulations aimed at boosting the housing market and allow SMEs to purchase and sell out property.
Most buyers of real estate belong to middle and upper class, and the proportion of upper class buyers recently increased due to the recession which took place in 2008 while middle-class buyers chose to save instead of investing (Howard, 2010). The major number of real estate purchases is made by home owners for personal use; the remaining purchases are made for SMEs and wealthy individuals for resale and sometimes for rental purposes. There is also a category of buyers who belong to emerging economies but tend to invest into real estate in developed countries.
European real estate market is largely characterized by purchases for local purposes, while real estate customers in Russia, China and in the Middle East are very active and tend to purchase property abroad (Van der Borght, 2012). European SMEs prefer to purchase real estate in Spain, Greece, Cyprus and in French Riviera. The criteria for choosing real estate among European SMEs are taxation, recreational opportunity and safe environment. In general, the preferences of European buyers from different countries such as Germany, Norway, Sweden, the UK, Finland and Netherlands are similar.
Russian SMEs seek for expensive real estate purchases – the number of affluent Russian customers searching for luxury real estate above €2 million increased to 8% (Van der Borght, 2012). Russian customers focus on the following countries: Bulgaria, Spain, Turkey, Montenegro, Italy, Cyprus, Germany, Greece and France (Van der Borght, 2012). Key psychological factors driving the purchases of Russian buyers are the prestige of foreign possessions and the need to secure investments against political and economic instability. The criteria for purchasing real estate for Russian SMEs include proximity to well-developed European countries, personal experience and opportunities for tourists.
Chinese SMEs also demonstrate strong interest to real estate overseas, primarily due to heavy regulations and control measures used for the internal real estate market. Statistics shows that 30% of Chinese home buyers started looking for overseas real estate (Dunning, 2008). In particular, the investors from mainland China and Hong Kong constitute 10.8% of real estate seekers in the United States (Garvin & Artermis, 2009). Chinese SMEs also actively purchase real estate in Australia and Europe and are most attracted to countries with large Chinese diaspora. Chinese buyers pay a lot of attention to educational opportunities for their children, and view investments into real estate overseas as a means of securing their future and the future of their relatives in the case of problems in China.
Middle Eastern real estate buyers express notable interest to the European market and moderate interest to the real estate market in the United States. Middle Eastern SMEs prefer purchasing premium segment real estate objects. Customers from Middle East pay significant attention to the UK real estate market, primarily due to the historical links created between Middle Eastern countries and the UK in the colonial era. For Middle Eastern buyers, the prestige of the location and the neighborhood are very important real estate characteristics.
Regarding Cyprus’s position in real estate market, it is possible to assess it as emerging. The country is now challenging real estate positions of such market leaders as Spain and Greece. While Spain is viewed as a more expensive investment location and Greece is perceived as the economically unstable market, Cyprus emerges as an important real estate player with reasonable real estate prices and sufficient level of economic development. Although Cyprus is located relatively far from key European countries, its integration with the EU made real estate market more attractive for European buyers. Russian buyers also demonstrate notable interest to real estate in Cyprus. Further improvement of economic situation and social stability combined with loyal fiscal policies and encouragement of foreign investment will attract more international customers to Cyprus and fuel real estate market.
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