Continent lures investors

PUBLISHED : Wednesday, 11 April, 2012, 12:00am
UPDATED : Wednesday, 11 April, 2012, 12:00am


Savvy Hong Kong and mainland investors are looking at less high-profile parts of the property sector in Europe, as traditional overseas hunting grounds continue to post eye-watering price increases.

Over the past decade there have been no shortage of buyers from Asia looking at property in London and Switzerland. Nevertheless, with prices in the British capital set to increase by 22.7 per cent over the next four years and real estate in Zurich and Geneva at their highest level in nearly 20 years, the cost is prompting searches for homes elsewhere. The emerging middle classes of China and Asia are now casting wider nets to find their second, third or fourth homes in order to find some value.

One place which is benefiting is France, from alpine holiday homes to retreats in rural Gascony. According to global luxury real estate company Knight Frank International, it is the excitement of fine wines and thoroughbreds that are luring investors. Mark Harvey of the overseas desk says: 'There is growing interest for vineyards, equestrian estates and prime residential [property] in Paris.'

Chinese interest in French wine, and fine wine in particular, has been well documented, so going upstream might be considered a sound investment. It also offers a foothold into one of Europe's oldest and most venerated industries.

The Chinese are known for their love of betting and some are seeing equestrian estates as a way of combining two investment classes - namely sizeable landholdings and horse training.

Knight Frank is recording increased interest in estates in Bordeaux and Deauville, while in the capital, the 8th arrondissement, where the French president resides, is an appealing and slightly cheaper alternative to London.

The company says it is not seeing any marked residential interest elsewhere in Europe, but has reported Chinese interest in commercial and hotel properties in Switzerland and Scandinavia.

There is another surprising place where investors are returning, thanks in part to an aggressive marketing campaign directed at Asia, and that is Spain. The country's property prices have been ravaged.

According to figures compiled by the director of the leading Spanish property information and investment site, Spanish Property Insight, Mark Stucklin, volumes of residential sales have fallen by 74 per cent since 2007, while prices are down 56 per cent.

'There is no doubt that some low-end properties in Spain will just be left to rot,' he says. 'They are unsaleable and it will cost too much to knock them down. But in the key areas of Barcelona, Madrid and Valencia, buyers are coming back and many of them are from the mainland and Hong Kong.'

Although the numbers are quite modest at the moment, many Spanish residential companies are focusing marketing efforts outside the traditional markets, such as Britain and Germany, and targeting new markets, including the mainland.

'Spanish properties are presenting the best value for 25 years,' says Stucklin, who also writes on Spanish property problems for the Sunday Times in London. 'We are now seeing Chinese starting up many businesses in Spain and what will follow, as the communities develop around these businesses, is an investment in property.'

David Vaughan, who heads Savills international residential, says: 'Spain is suddenly far more competitively priced. It is safe, the flights are good, the schools are some of the best in the world, and then there are additional benefits, like having the longest polo season in the world.'

His company is behind one of the oldest and most established resorts in Spain, Sotogrande, which markets itself, modestly, as the greatest resort in Southern Europe.

While that may be a matter of opinion, what is certainly the case is that Savills is reporting a mass growth in interest in Spain and France from a substantial Chinese middle class.

'The prime market is interesting of course, but what is new and surprising is the drive of this new sector we haven't seen before, who are buying because they want luxury living, but also all the structure of great hospitals, transport and business links,' Vaughan says.

While Sotogrande is now more than 50 years old, a more hip corner of Europe reports increased Chinese interest.

The island of Ibiza is, according to Stucklin, 'now a must-see destination on the grand tour circuit'. The party island is distorting the overall property market as places are snapped up as soon as they are posted.

'Ibiza has had its best year ever,' Stucklin says. 'It has a great reputation with the party crowd, but is now also growing up. The rental yields are great.'