With numerous, booming property markets in capital cities such as London, Paris and Berlin, property investment has coveted these particular cities. However, despite the numerous opportunities presented by these businesses, gaining access to the markets can be difficult due to the high levels of interest. In addition to this, obtaining a significant portfolio, particularly in residential developments, means a large investment is often required. In order to secure investments, many developers may turn to property development finance which offers fast financial solutions. However, while these developers may be seeking the prime opportunities in these capital cities, there are a number of secondary cities which are beginning to grow and open up diversified opportunities.
Emerging Cities
There have been a number of emerging trends suggesting that investors are turning to real estate investment opportunities in cities which were generally hit by an economic downturn. In 2015, the Emerging Trends in Real Estate Europe report saw real estate investment in cities such as Madrid, Athens, Lisbon, Birmingham and Amsterdam rising dramatically. As a whole, residential property in Europe has outperformed other real estate sectors, and secondary city investment has the opportunity to offer high returns, and act as a hedging instrument. All of this can allow investors and property developers the opportunity to diversify a wider portfolio, and ride the wave of the residential property development sector.
Taking Risks
Despite the risks involved in investing in secondary cities, many property developers are becoming increasingly comfortable, due to the opportunities which open up when it comes to searching for returns. Some examples of this include the growth of investment in Ireland (mainly Dublin) and Spain, which are both recovering markets. Despite the impact of the economic downturn, the recovering markets offer new opportunities for affordable investment, which can then result in higher returns for the developers themselves, once the development is complete.
However, investment in the second-tier city is not always a success, and there have been numerous projects based in cities in Africa which have seen this. Nevertheless, second-tier cities tend to be focused on pro-development which is a major benefit for property developers looking to the future. With more dynamism, stronger employment opportunities due to the millennials which often drive the second-tier cities, and much stronger rent cycles in many of these cities, the risk is usually worth the investment.
Benefits Of Decreased Competition
While it may seem simple, many property developers are unaware of the major benefits that decreased competition offers. In spite of the economic downturn that Europe is facing as a result of Brexit and as the continent is still recovering from the 2008 financial crash, the ‘fertile’ ground that Europe’s secondary cities offer are still extremely inviting. Less competition often means cheaper prices when funding the initial investment, and as a result, higher returns are often expected. These less competitive environments often allow real estate developments to thrive, and provide a strong source of income to help fund the next project for many developers.
