Luxury residential real estate can be extremely attractive to investors with a more stable market and high-demand locations across Europe offering significant returns. Although prime prices slowed over the pandemic, the market still grew and, overall, prices today would need to drop by over a third to return to pre-pandemic levels. Over the course of 2023, prices are expected to continue upwards by between two and four percent in the most in-demand areas. To make the most of this ripe market and have the highest chance of success, investors should do four things; set goals, understand tax, know where to look, and collaborate with experts.
Know your investment goals and take a careful look at tax
Are you looking for long-term appreciation or short-term gains? Interested in rental income or a vacation property? Knowing your goals will influence better investment decisions.
This is especially true when it comes to tax implications. Take the UK, where one tax property investors are liable for is Capital Gains Tax. If you want to buy a luxury house, flip it and make a quick profit, you’re subject to an effective rate of 18% – 28% on your gains.
The same process of flipping a luxury property in Cyprus may cost you a flat rate of 20% just in capital gains. In Belgium, the figure jumps up to 33% if you sell the property within five years of buying it, but drops to just 16.5% after that period. This is without taking into account a host of other charges such as registration fees, property taxes and stamp duties.
The property tax system varies greatly between European countries and they often change over time. There’s a lot to keep up with that will influence where and when is best to buy and sell property according to your investment goals. It’s a very good idea to consult a professional to understand tax implications and structure your investments in a tax-efficient way.
High-End Real Estate Markets: Where and What to Look for?
A prime location can command high rental income, increase the property’s value, and provide a better resale value. Look for properties in desirable neighbourhoods with high demand and limited supply. Locations like waterfronts and exclusive gated communities can be good ones to look out for in urban areas.
Across Europe, we’re also seeing the pandemic’s ‘race for space’ continue across all markets and countryside luxury property is still of most-wanted status in many countries. For example, the UK’s idyllic Cotswolds region has seen prices for country houses over the £2m mark rise by almost a quarter in recent years, driven by local and international buyers searching for a rural high-end retreat as well as those purchasing a second home.
Southern Italy is another region showing a strong increase in interest for countryside luxury, encouraged by the freedoms of remote working, desire for outdoor space and bigger second homes. The real estate market there has seen residential property transactions go up by nearly 20% in the last couple of years.
Although property in prime cities is still very much sought after, the comparatively low purchase price for luxury property in the countryside, with its extra room for expansion, means that the potential return on investment could be considerably bigger when buying in the countryside compared to in the city.
Partner with the right professionals
Finding and buying a luxury property is sometimes a complicated process and the best route to success is having a real estate professional on your side. An agent with experience in the luxury market can help you find properties that match your investment goals and guide you through the complex legal and financial considerations, connecting you to other professionals.
As an investor, you have endless options and opportunities in the high-end property market. But to be successful, you must be clued up on your investment goals, the tax implications of your choices, and the property’s potential. And whether you’re feeling confident about a townhouse in London’s Belgravia, or unsure about an Italian farm conversion, it’s always best to get the help of a professional. They’ll help you understand your investments and make the most out of the high-potential luxury real estate market.
By Michael Polzler
About the author: Michael Polzler, CEO at RE/MAX Europe
With more than 25 years of diverse industry experience, Michael brings a wealth of knowledge and dynamic business leadership as CEO at RE/MAX Europe. Michael joined RE/MAX in 1986, and during his time as Regional Director and Executive Vice President of RE/MAX Ontario-Atlantic Canada, he expanded the franchise network to over 350 offices and more than 8,800 agents.
Now based in Europe, Michael’s work has strategically positioned RE/MAX as Europe’s leading real estate organisation. Through his commitment to constant innovation, such as professionalising the industry through agent cooperation, and with a focus on dramatically redesigning the real estate customer experience, his visionary leadership is changing the way real estate is sold in Europe.
More Information www.remax.eu