- By the beginning of 2022, the activity of cross-border real estate investors in most countries had returned to or exceeded the pre-crisis level.
- The highest rates of market recovery and growth were noted in countries offering residence permit or citizenship by investment programs, and the availability of online transactions serves as an additional growth factor.
These are the main results of the tenth annual Tranio survey, conducted in late 2021 – early 2022 among 256 experts from 40 countries. The respondents summed up the results of last year and shared their forecasts and expectations for 2022.
Over the ten years that my colleagues and I have been conducting surveys of market experts, cross-border investors have become more experienced and literate.
Many of our clients are already well aware of the “rules of the game” in the market of the country where they buy real estate, adhere to realistic expectations of profitability, have acquired a team of consultants and as a result can act on an equal footing with local investors. Just ten years ago, this was a rarity.
“Golden visas” contribute to the recovery of the market
More than half of the respondents (54%) observe that the activity of foreign buyers has returned to or exceeded its previous level. However, 17% of the survey participants believe that by the end of 2021, the situation has not improved or even worsened compared to the height of the pandemic.
In those countries where investment residency programs are in place (“golden visas” in Spain and Greece, “golden passports” in Malta, etc.), the market has recovered faster than in regions where there are no similar programs. In countries offering residence permits or citizenship by investment, 40% of respondents believe that foreign buyers have become more active than before the pandemic, while in other countries only 28% answered this way.
During the pandemic, it was difficult for many to adapt to the forced restrictions on movement, so investors were more interested in such programs and products that make it possible to move more freely between countries.
Based on the survey data, we calculated the recovery index of the cross-border real estate investment market for selected countries. This index takes values from 0 (if all respondents chose the most pessimistic answer option) to 1 (if all chose the most optimistic option).
Portugal, where the market recovery index is 0.87, and Spain (0.86) are the leaders in the corresponding ranking of countries. Germany and Thailand: In both countries, the index was 0.29.
In the comments to the responses, Tranio survey participants noted that in 2020-2021, against the background of a decrease in cross-border transactions, demand from local buyers increased in each of the countries studied.
All Tranio partners note the growing interest of local buyers. Some partners, who previously focused only on foreigners, have started working with local clients.
It is still difficult to travel to other countries, and money needs to be invested somewhere, so investors enter their local markets.
The average budget for residential real estate transactions is 354 thousand euros
The survey data allows us to estimate the median budget of transactions with foreign buyers of residential real estate. The average for all the countries studied was 354 thousand euros, although the figures vary significantly from country to country. The most expensive housing is in France (median budget — 1 million euros) and the USA (933 thousand euros), the cheapest is in Turkey (200 thousand euros).
There is a correlation between the value of real estate and the market recovery index: on average, the budget is higher in those countries where the market recovered better in 2021.
Europeans are the most active buyers, and the flow of customers from Russia and China are shrinking
The majority of respondents (62%) believe that European residents are the most active category of buyers purchasing real estate outside their country of residence. In France, all 100% of respondents indicated this category, in Spain — 91%, in Italy — 90%.
In second place in 2021 were immigrants from Russia and the CIS (42%), followed by buyers from the Middle East, China, the USA and Israel. Some respondents noted that representatives of Canada, India, the Balkan countries, Australia, Brazil, Egypt and South Africa are active in the market.
The survey results show an interesting trend: the more respondents in a particular country noted the activity of European buyers, the less the activity of immigrants from Russia and the CIS countries. This trend is most evident in Turkey, where 73% noted the activity of Russian—speaking buyers and only 18% – the activity of Europeans. On the contrary, in France, Spain and Italy, only 17-19% of respondents noted that buyers from Of Russia.
The activity of property buyers from the Middle East was most noticeable in the market in Turkey (55% of respondents), Cyprus (38%) and in Greece (32%).
Chinese immigrants ranked first among property buyers in the United States (71 of respondents) and third in Portugal (30%). In second place in Portugal — buyers from the USA (40%).
Against the background of the pandemic, the activity of cross-border investors from Russia and China. These countries were identified by 38% and 28% of the survey participants, respectively. However, some respondents note a significant outflow of buyers from Europe, the Middle East and India.
The decline in the activity of Russian-speaking buyers is especially noticeable in Spain and Italy (65% of respondents in each of these countries stated this), as well as in Montenegro (57%). On the contrary, the share of this category of investors almost did not decrease in Cyprus (only 8% of the survey participants noted their outflow) and in Turkey (9%).
The share of buyers from China has significantly decreased in Greece (61% of respondents think so) and Cyprus (50%). The opposite picture is in the USA, France and Montenegro: In these countries, none of the survey participants noted the outflow of Chinese real estate buyers.
The decrease in the activity of Europeans was most noticeable in Turkey (according to 64% of respondents), the USA (50%) and Latvia (40%).
There is a moderate correlation between the budget of transactions and the activity of foreign buyers. The flow of investors from Russia and China decreased more strongly in “expensive” countries and weaker in “cheap” ones, while buyers from Europe, on the contrary, left primarily countries with low transaction budgets.
Since the outflow of foreign buyers in 2020-2021 is primarily associated with “covid” restrictions, it can be expected that as these restrictions weaken, international buyer activity will not only recover, but also exceed the average level before the pandemic – accumulated deferred demand will return to the market.
Interest in “golden visas” has grown especially in Portugal and fell in Latvia
The number of investors wishing to obtain a “golden visa” or “golden passport” in those countries where such programs operate increased by an average of 1.2 times in 2021. Portugal stands out sharply against the general background, where our respondents estimated an average increase in interest in investment residency by 2 times, followed by Montenegro with an increase of 1.5 times.
Since 2022 in Portugal is no longer given a residence permit for investments in residential real estate in coastal locations, including Lisbon and The port.
The program of “golden passports” in Montenegro was going to be curtailed at the end of 2021, and at the last moment it was extended to 2022. So in both of these countries, investors were rushing to buy real estate while the program was operating in the same mode.
According to the survey participants, interest in “golden visas” in 2021 did not grow in only two countries: in Cyprus it remained at the level of last year, and in Latvia it decreased by 38%.
There is a high correlation between interest in investment residency and the market recovery index: this supports the hypothesis that residence permit and citizenship by investment programs supported the real estate market against the background of the crisis.
The availability of online transactions contributes to the recovery of the market
Due to restrictions on international travel, the number of online purchases has increased. In 2021, respondents estimated that, on average, foreign buyers of real estate concluded 23% of transactions via the Internet without visiting the country of purchase. Portugal stands out among all the countries again, where the share of online transactions reached 42%.
When buying an apartment for rent, our clients are now more likely to close transactions remotely than by traveling to the country of purchase.
In areas with good rental yields, apartments in new buildings are bought up at the earliest stages of construction, when there is virtually nothing to look at on the site.
The share of distance purchases correlates with the market recovery index. This suggests that the availability of online transactions is another driver of cross-border sales in addition to investment residency.
In addition to the closed borders, other factors contributed to the popularity of online transactions in 2021. In particular, 44% of respondents said that buyers chose a remote transaction because they wanted to buy the property before prices rose. Another 42% of the survey participants noted that sellers have become more active in demonstrating real estate objects via the Internet: for example, to conduct online screenings or video filming of objects using drones.
The option “Buyers were in a hurry to purchase real estate before it became more expensive” is leading in Thailand (it was chosen by 100% of respondents), Montenegro (83%) and Cyprus (78%), and the option “Sellers have become more active in displaying objects via the Internet” is especially noticeable in France (80% of respondents), Turkey (64%) and Italy (61%).
In Portugal, the majority of survey participants (67%) believe that distance transactions have become more popular because customers made purchases to obtain a residence permit. In Greece, this answer is also in the first place: it was chosen by 44% of respondents.
In 2021, about 80% of all Tranio clients who bought real estate remotely focused on “golden visas” or “golden passports”.
In 2021, the real estate market recovered faster in those countries where sellers were more active in showing objects on the Internet. This conclusion is supported by the fact that the answers to the question about the factors of popularity of online transactions consistently correlate with the index of real estate market recovery.
Real estate market players looked to the future with optimism
In 2022, the international real estate market will be more active than it was before the pandemic, according to 60% of all respondents. In the group of countries with investment residency programs, this figure reaches 68%.
We expect that against the background of the market recovery, the ratio of sales volumes for different types of real estate will change. For example, investors who were previously looking for short-term rental properties will now more often focus on long-term rentals.
Similarly to the market recovery index, we have calculated for selected countries the optimism index of cross-border real estate investment market experts, reflecting market expectations in 2022. This index peaked at 1 in the United States, where at the end of 2021, all 100% of respondents believed in the most favorable scenario. The optimism index exceeded 0.67 in all countries except Thailand, where 40% of respondents expected the next pandemic or other major crisis in 2022.
We expect that against the background of the market recovery, the ratio of sales volumes for different types of real estate will change. For example, investors who were previously looking for short-term rental properties will now more often focus on long-term rentals.
Similarly to the market recovery index, we calculated for selected countries the optimism index of experts on cross-border real estate investments, reflecting market expectations in 2022.
The optimism index peaked at 1 in the United States, where at the end of 2021, all 100% of respondents believed in the most favorable scenario. The optimism index exceeded 0.67 in all countries except Thailand, where 40% of respondents expected the next pandemic or other major crisis in 2022.
A correlation was found between the experts’ optimism index and the factors of the popularity of remote transactions. The index is noticeably higher in those countries where laws or other government measures have been adopted to facilitate online transactions. At the same time, the optimism index is lower where banks are more willing to open accounts remotely.
I think that the trends of online transactions will continue in the long term. Many investors have learned to remotely select counterparties and make significant investment decisions; these habits will remain after the pandemic.
New vector: investment trends of Russians in the first quarter of 2022
In March-April 2022, there were new trends in demand from buyers from Russia and a number of CIS countries. In previous years, Russians preferred real estate investments in countries such as Spain, Germany, Greece and Cyprus.
Due to the sanctions of Western countries and changes in Russian legislation, today buyers from Russia, Kazakhstan and Belarus focused on the markets of the UAE, Turkey and Georgia, as well as increased interest in Southeast Asian countries.
The actual growth of Russians’ demand for foreign real estate is ahead of the projected pace. According to Tranio, in April 2022, the number of purchase orders was 15% higher than in the same month last year. The volume of transactions closed in the first quarter of 2022 also exceeds last year’s results.
In the UAE, Russians most often choose apartments in new buildings in Dubai worth about 205 thousand US dollars. By the beginning of May, almost all apartments in this budget were sold out in residential complexes with a deadline in the first or second quarter of 2023.
In Turkey, new buildings in Istanbul are in high demand among Russians, where there is the largest selection of facilities that are well suited for the investment citizenship program.
According to Tranio monitoring, in the first quarter of 2022, the demand of Russians for real estate in Turkey increased almost 3 times compared to last year, and for real estate in the UAE – 1.5 times. In the same period, the interest of Russians in real estate in Southeast Asian countries increased: in Thailand – by 85% and in Indonesia – by 75%. Despite the large flow of applications, Tranio experts do not expect a comparable increase in the share of these countries in the volume of transactions.
There are limits to the growth of Russian investments in this market. On the one hand, the remoteness of Bali and the islands of Thailand makes these locations less convenient for buying a “second home” compared to Turkey or Georgia.
On the other hand, Southeast Asia is less attractive for business immigration than Dubai or Israel.