Friday, February 02, 2007

Europe's dearest flats + rental yields in europe

Monaco is the most expensive place in Europe to buy a flat. According to the Global Property Guide, a 120 square-metre (1,292 square-foot) apartment in the principality will cost you almost €3m ($3.9m). London's swankiest districts (Belgravia, Chelsea and Knightsbridge) are in second spot—although monthly rents there are higher. The housing booms in Ireland and Spain have earned Dublin (€600,000) and Madrid (€480,000) places in the survey of the top dozen cities.

The Baltic capitals of Vilnius (€455,000) and Riga (€362,400) are not far outside the top group.

No German city makes our chart: the dearest is Munich, at €400,000.



Rental returns cannot fall forever

Nowhere in Europe are rents keeping pace with the continued rise in property prices. This is cause for concern.

At the Global Property Guide, we informally consider a danger signal to be rental returns of around 4% or below.

Several European capitals offer rental income yields around or below this 4% level. An example is Madrid, where rental returns are now at only 3.15%.

i´m surprised to see some of the yields that high.

especially in places that are in "bubble territory". maybe this are gross numbers.

here is a number for the uk

"Gross yields are in decline and were 4.6% in October compared with 4.8% a year ago. After costs this would equate to a net yield before tax of around 3.25%."

http://immobilienblasen.blogspot.com/2006/12/uk-rate-rises-bite-into-buy-to-let.html

i think the situation in the office sector is not much better..............

http://immobilienblasen.blogspot.com/2006/10/london-calling-new-skyline.html

and remember that you can get risk free gilts/bonds with a5% yield.......

compare this with rhe figures from the us

"Yields are low in the US, ranging from 2 to 4%."

"In thriving working class neighborhoods, it is possible to get 6% yields, but such opportunities are rare".

and using the VALUATION YARDSTICKS FOR THE HOUSING MARKET that says that everything that has a lower gross yield than 6 (price/rent 16,7) is overvalued and everything over 8 (p/r 12,5) is undervalued there are not many bargains left...... and you have to " go east".......

and keep in mind that these are the gross numbers (sounds to me like wall street reporting with their pro forma numbers...... ignoring taxes etc.)

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5 Comments:

Anonymous poszi said...

Where did you get the data about rental yields? The number for Warsaw is a complete fantasy. The gross yield is at best 5%, and more like 3-4%.

6:05 AM  
Blogger jmf said...

hi ponzi,

i have forgotten the link

http://www.globalpropertyguide.com/country.php?id=155&cid=eu&cat=3

Positives
1. Highest yields in Europe
2. Low to moderate transaction cost
3. Strong post-transition economy
Negatives
1. High rental income tax
2. Strong pro-tenant sentiments


but i have also my doubts that all the data is correct.

thanks for the poland update.

7:54 AM  
Anonymous poszi said...

This report is either severely outdated or is taken out of the thin air. The denominator (housing prices) is severely understated and the numerator (rentals) is slightly overstated. The prices in the city center are at least twice higher than they report.

11:31 AM  
Blogger jmf said...

unfortunately they have put no date to their data.

i thought that when the economist puplishes the numbers that they are close to reality.

either way you look at this. the bubble is almost omnipresent....(excluding germany...so far...)

thanks once again for the info.

1:24 PM  
Anonymous Droidd said...

Reporting from Moscow, Russia - report is complete BS. Both prices and rents are very far from average, income returns are fantasy too. "Average" sqm in Moscow costs about 4k+USD.

11:59 PM  

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