Real estate investing around the world continues to be trending, given that the global economy continues to expand. The need for new houses, office areas, shopping malls, and others, is increasing as well, but we must understand each geographical region has its own particularities and as a result, real estate investing will provide different results.
To put things into perspective, we’ll analyze the main advantages and disadvantages of investing in Western Europe and African real estate. In addition, we’ll explore what real estate investors think about this topic and what should any other investor consider before deciding to invest in any of these two areas.
Investing in predictable areas?
Western Europe had been for centuries at the center of global economics and as a result, real estate had been one of the best performing industries. Even though cities like London, Paris, Rome, Lisbon, and others had witnessed tremendous growth, investors are able to find new deals, especially in areas that lagged behind the averages.
Investing in this region comes with several important advantages. One is that market liquidity is very high. This simply means is much easier for an investor to find a buyer for a property, given the high standard of living and high buying power of local people and businesses. Second of all, we’re talking about the most democratized region in the world, where the rule of law and civilization had been at the core of the major developments.
“Investing in Western Europe is not a low-rated strategy and with well-done research as well as focus on targeted areas, investors can still find interesting opportunities to invest in new properties”, said Ofir Eyal Bar, a real estate investor.
When it comes to disadvantages, some may argue that given the high level of development, the projected returns might be smaller, as compared to less-developed regions like Africa. However, as we’ll see in the next paragraph, higher returns come hand in hand with other things.
Higher risks = higher returns?
On the flip side we have investing in African nations, less-developed but with higher growth potential, as many experts claim. It’s true that the urbanization process is underway and as the middle class continues to grow, so does the real estate industry.
The so-called “African opportunity” had been a major talking point for the past decade and a few big companies had invested there from an early stage when most investors were not so eager to take a chance:
“Africa is a stock picker’s paradise – if you can handle the volatility and lack of liquidity -. The so-called African opportunity is becoming an investment talking point. Investor perception has moved from Live Aid to a focus on economic fundamentals.”
Although Africa is one of the continents with the highest growth potential, the lack of developments comes with a series of disadvantages that must be mentioned. As seen in the above-mentioned quote from investmentweek.co.uk, we’re dealing with a volatile and illiquid market. On top of that, we don’t have the same consolidated democracies as in Western Europe and the lack of development on the regulatory side means real estate investors need to take greater risks for higher returns.
Which side has the upper hand? None. As we’ve seen, both Western Europe and Africa have both strengths and weaknesses. That leads us to believe that is up for each real estate investor to form a particular investing philosophy and then look for opportunities. The bottom line is that even in developed countries future growth should not be excluded.
“Technological developments will lead to the appearance of new industries and real estate investors will have plenty of work”, continues to highlight Ofir Eyal Bar. Also, Africa will have a bigger gap to fill in order to catch from behind the advanced economies, meaning plenty of opportunities there as well.
Real estate companies in both Western Europe and Africa continue to secure significant deals, and as we move ahead, both regions will have challenges and opportunities lying on the horizon. It’s up for each investor to be well-documented in order to anticipate and find a way to monetize them.