Europe &
International Real
Learning Objectives
 Identify how the social, economic, political, and geographical
characteristics of European countries impact real estate.
 Recognize how formation and development of the EU impacts
member countries economically and culturally.
 Develop market intelligence by researching factors that shape
European real estate markets and assessing business
 Develop a network of key contacts in real estate, business,
and government in order to reach clients and customers and
complete property transactions.
 Gain ideas on methods for promoting markets, properties,
and services.
Page 2
Course Structure
 Europe Today
Market Dynamics: Challenges, Choices,
Does Culture Matter?
A Look at Germany
A Look at the United Kingdom
A Look at Spain
Country Profiles
Page 2
Countries Included
Czech Republic
Norway *
Russia *
Switzerland *
Turkey *
Ukraine *
United Kingdom
Page 5
1. Europe Today
Page 8
Europe Lives Its History
Two World Wars
The Marshall Plan
The Cold War
Page 10
Europe Lives Its History
Fall of Berlin Wall,
Cold War ends
Revitalization of Central
and Eastern Europe
Formation of the EU
EU expansion 04–07
Page 11
United in Diversity
Peace, prosperity and
freedom…in a fairer, safer world
Four Freedoms
 Goods
 Capital
 People
 Services
Page 12
Schengen Agreement
Unrestricted cross-border travel
No passport check at border
United Kingdom and Ireland—opt out
Schengen area countries participate in
the U.S. Visa Waiver Program
 Except Poland
Page 12
EU Decision Making
Council of Ministers and European Council
 Primary decision-making body
European Parliament
 Cooperation
 Assent
 Co-decision
European Commission
 Implements regulations
and directives
Page 13-16
Reform Treaty
Streamlined decision-making
Capped EU Parliament at 751 delegates
 6–96 delegates per country
Subsidiarity and proportionality
 Decisions made close to the citizen
 EU acts only when more effective than
local, regional, or national action
Page 16-17
Future Expansion
Stabilization and Association Agreements
Catch up economically
Unanimous approval required
Candidates: FYROM, Iceland,
Montenegro, Serbia, Turkey
Potential candidates: Albania, Bosnia
Herzegovina, Kosovo
Page 17
Turkey EU Membership?
 Pro—Crossroads of
East and West
Affinity to Europe
Oil & gas pipelines
Market opportunities
Large military
NATO member
Many Turks live in
Europe already
 Con—Too big, too poor,
too different
5% of land is European
EU members disapprove
Human, minority, religious
 Cyprus situation
 Erodes small countries’
Page 18
Cultural Heritages
Council of Europe as conservator and
Cultural heritage: a force for fostering
social cohesion and inclusion
Dynamic resources: built environment,
natural environment, values, traditions,
historic sites, arts, archeology, and
Page 22
Council Initiatives
European Heritage Days
Cultural Corridors
Culture Watch Europe
Youth programs
Teacher training
Page 23
Cultural Heritage and Real Estate
Economic development
Town planning, building
standards, and future
Specialized building
Preservation enhances
property values
Page 24-26
2. Market Dynamics
 European countries are aging, 2040 median age—47
 Reduced workforce, productivity, economic growth
 Higher pension, health care costs
 Intergenerational equity?
 Some countries grow, some decline
Challenges for Real Estate?
Potential decreased demand for all types of real
estate—residential, commercial, and retail
Page 30-31
 Challenge or a solution for demographic issues?
 Integration into the society and the workforce
 Immigrant in EU—6% of population
 3 out of 4 immigrants live in Germany, Spain, U.K.,
France, or Italy
Challenges for Real Estate?
Population growth correlates with demand for real
estate. Immigrants become homeowners, renters,
business owners, and retirees.
Page 32-35
 Unemployment
 Lack of job opportunities
 High youth unemployment
 EU Youth Guarantee
 Erosion of fundamental economic capacity
Challenges for Real Estate?
Can workers buy a home, form a new household?
Correlation with commercial and retail real estate.
Page 35-38
North-South Disparity
 Triggering events: global recession, revelation of
Greece’s misstated deficit
 Scrutiny on Spain, Ireland, Italy, Portugal
 Solvent, optimistic, prosperous north versus
indebted, pessimistic struggling south
 France: northern economy, southern attitude
Challenges for Real Estate?
Capital flight, high-yield buying opportunities with high
risk, erosion of property values, suppressed demand.
Page 38-40
Future of the Euro
 Monetary union without a fiscal (banking) union
 Interconnected globally, few firewalls
 Governance structure slows action
 ECB policy mandate: maintain stability, low inflation
Challenges for Real Estate?
High cost of dismantling the eurozone? Currency
devaluations would cause immediate value loss.
Investor equity wiped out. Recalculation of mortgages.
Investor stampede to exit.
Page 41-42
Integration or Separation
 Break up EU or integrate to solve structural issues?
 Will countries be willing to cede more control?
 Scared into greater integration?
 Will future generations see EU membership as a
benefit or a burden?
Challenges for Real Estate?
Dissolution without planned transition would provoke
economic chaos. Integration could standardize
property transaction procedures
Page 42-44
National Banks or Banking Union
 Completion of an EU banking union for financial
stability and consistency
 Pre-crisis: no enforcement mechanisms or
consequences for missing goals
 Post-crisis: EC and ECB moving toward a banking
union, SSM, SRM, deposit guarantees
Challenges for Real Estate?
Real estate thrives in an environment of orderly
financial markets and banking systems.
Page 44-45
Europe 2020
 Smart: Developing an economy based on knowledge and
 Sustainable: Promoting a more resource efficient,
greener, and competitive economy
 Inclusive: Fostering a high-employment economy of
economic, social, and territorial cohesion
Challenges for Real Estate?
Roadmap for the EU to recover and prepare for the next
decade. See page 46 of Manual.
Page 46-47
Europe 2020 Economic Governance
European Semester
Stabilization and Growth Pact
Euro Plus Pact
Challenges for Real Estate?
Economic monitoring for property bubbles, growing
current account deficits or surpluses, or decreases in
Page 47-48
Austerity or Government Stimulus
 National budgets are more complex than households
 Continuing austerity or increasing government
spending to stimulate the economy?
 Economic growth or downward deflationary spiral?
Challenges for Real Estate?
Austerity has generated a general downward spiral as
economic capacity diminishes and real estate
investment is postponed, infrastructure deteriorates.
Page 48-49
Residential Real Estate
High rate of homeownership: 70%
Highest ownership rates in Central and
Eastern European
Germany—wealthy country but majority
rent, very pro-tenant
House price trends reflect north-south
economic disparities
Page 49-51
Housing Bubbles
Rapid price appreciation: Estonia,
Slovakia, Latvia
Spain and Ireland housing construction
Euro mortgages in non-euro countries
Recourse debt
Page 52-53
Mortgage Directive
Standardized Information Sheet
Warnings on foreign-currency loans
Evaluation of borrower’s ability to repay
Early pay off permitted
 Authorized intermediaries “passport”
Encourage reasonable forbearance
No mandatory LTV or DTI
Page 53
Property Expos
Barcelona Meeting Point
CEREAN Conference
Expo Real
FIABCI World Congress
MIPIM Europe
OPP Live
Place in the Sun
Page 58
Investor Visas
Intersection of bargain real estate and nonEuropean wealth
Investment buys resident status
Unrestricted travel in Schengen area
Safe haven for cash
Access to prestigious schools, universities
Personal safety
Moral, ethical questions?
Page 54-55
Commercial Real Estate Trends
Foreign direct investment returning
to pre-crisis levels
Competition for prime assets
Cash chasing assets
Sustainability as a strategy
Page 55-56
Your Challenge: Business Building
 Who is my target market and where are they?
 How can I reach them?
 What does my target market buy or sell?
 What is my value proposition?
 Will I compete on time, cost or quality?
 No planning is a plan to do nothing.
How will you meet the challenge of building
your European real estate business?
Page 57
Keeping Up-to-Date
Prospects and
Spheres of influence
News and trends
Magazines, journals,
books, and
Page 59
3. Does Cultural
High and Low Context
High Context
Low Context
Values formality,
relationships and the
slower pace needed to
develop them
Values informality,
results, fast pace,
punctuality, and direct
Page 62
Geographic Location
Geographic Location
North and West
South and East
Czech Republic
Page 63
4. A Look at
16 Federal
States (Länder)
Page 68
25 Years After Reunification
Economic convergence
Privatizing property
Solidarity tax
Social convergence
Page 69-70
When Germans Buy Homes
Once-in-lifetime event
No MLS, brokers sell their own listings
All of the facts, please
No extended preclosing time
Signing ceremony completes transaction
Page 72-73
Nation of Renters
 “Once a renter always a renter”
 Lowest rate of home ownership in
the EU
 About 53% own homes
 Laws are very pro-tenant
Page 74
Energy Efficiency
Required energy certificates:
 Demand-oriented certificate
 Consumption-oriented certificate
Provides information on energy
operating costs
Allowable factor for rent increases
Page 74
When Germanys Buy Abroad
Mediterranean coastlines
and islands, west coast of
Check direct air routes
from German hubs
Deliberate approach to
second home buying
Buyer loyalty may be an
Page 75
When Foreigners Buy in Germany
No restrictions on foreign purchase
All proceedings are conducted in German
Hire an interpreter
Obtain a copy of the purchase contact
before the signing ceremony
Be prepared to ask questions during
contract reading
Page 75
Commercial Real Estate
Concentrated in Berlin, Hamburg,
Düsseldorf, Frankfurt, Munich, and
Eastern Germany lags behind the west
Competition for prime assets bids up
Spillover seeks opportunity in outlying
areas, second-tier cities
Page 75-77
Doing Business
Rules and regulations contribute to an
orderly life
Business proceeds without a personal
Straightforward communications
Contracts followed to the letter
Page 78-79
Beyond the Basics
Business and personal life are separate
Working overtime shows lack of
No hand gestures, touching, or
Home—the one place where a German
can relax, show individuality
Page 80
5. A Look at the
United Kingdom
 England, Wales, Scotland, Northern Ireland
 All citizens of U.K. are British
 Only those from England are English
 Scotland, Northern Ireland, Wales gradual
home rule, devolution
 High-speed Eurostar rail service—the
Chunnel—connection to continent
Page 82-83
Page 84
The transaction process
Buyer and seller appoint conveyancers or
Offers not a legally binding until
contracts exchanged, deposit paid
Conveyancer sets a date for completion
of the sale
Page 84-87
Housing Trends
Chronically undersupplied and high
Stagnated pace of homebuilding
Aging housing stock
Pent-up demand
Page 88
Mortgage Lending
Help-to-Buy Mortgage Guarantee
Help-to-Buy Equity Loan
Mortgage Review
 Ascertain borrower’s capability to repay
 “Fully advised sale”
 Restrictions on interest-only mortgages
Page 88-89
Buying Abroad
British retirees, holiday homes:
 Mediterranean
 Iberian coastline & islands
 France
 Central Florida
Where direct flights reach sun and sand
Page 90
When Foreigners Buy in the U.K
85% of new London homes bought by
foreign investors in 2013
Wealthy buyers: Russia, China, Singapore,
Hong Kong, Malaysia, India, and Middle East
No restrictions, low capital gains tax
Middle-income buyers priced out of market
Controversy: Luxury homes stand empty with
housing in short supply
Page 91-92
Commercial Real Estate
Perennial favorite of international buyers
Stability, quality of assets, many investment
grade properties, prestige, value growth
Competition pushes prices up but depresses
London plus the “Big 8”
 Bristol, Birmingham, Cardiff, Edinburgh,
Glasgow, Leeds, Manchester, and the West
Page 92-96
Doing Business in the U.K.
Observe formalities
No back pats, hugs, or air kisses
Be on time
English are masters of understatement
Make your case with facts and solid
Avoid a hard-sell approach
Page 97
Beyond the Basics
Multiculturalism reflects the colonial
Guard personal privacy, don’t discuss
personal or family matters
“Keeping a stiff upper lip”
Younger generations more relaxed about
protocol and interpersonal interactions
Page 97-98
6. A Look at Spain
The Costas of Spain
Canary Islands
Page 100-101
The Boom
The “Spanish Miracle”
15 years of above average-GDP
growth until 2007
Built on bricks and sunshine—home
construction and tourism
Page 102
The Real Estate Bubble
 Abundant and cheap mortgage financing
 Loosened banking regulations
 Pent-up demand
 Vacationers and retirees seeking warm climate,
low cost of living
200% price increase 1996 to 2007
More new homes under construction than
Germany, France, and the U.K. combined
Page 102-103
The Economic Crisis
2007 global financial crisis
Housing starts plummeted
Thousands of furloughed workers
Other European economies faltering
Repossessions and evictions
Shadow economy thriving
Page 104-106
Spain’s “bad bank”
Removed €50 billion in sour real estate
assets from bank balance sheets
Assets repackaged, sold to investors
Small savings banks (cajas) compete to
unload properties
Monitor SAREB activity
Page 107
Buyers looking for opportunities
Foreigners made 21.4% of residential
purchases in 2013
Buyers from: England, Germany, Denmark,
and Sweden, Middle East, Asia, and Russia
Visa investor purchases
Aspects that make Spain attractive—
climate, sun, beaches—still there
Page 107-108
The Future
2015 as turnaround year?
Low Euribor rate keeps mortgages
payments low
Several years of inventory on the market
No new construction in the pipeline
Future shortage of quality of homes
buyers want to purchase?
Page 108-109
Spanish Real Estate Transactions
No restrictions for foreigners to buy and
resell real property
Some differences in taxation of foreign
real estate ownership
Access Spanish property registry records
and info at
Page 109-112
Commercial Real Estate
 Madrid and Barcelona
 Commercial downturn, same as housing
 Stabilized at the bottom of the cycle?
 Opportunities for risk-tolerant investor
 Introduction of SOCIMIs (exchangetraded real estate investment funds)
Page 113
 Center of country, capital, and largest city
 Population: 3.3 million (6.5 Million metro area)
 International finance, corporate headquarters
offices, government administration
 Prime areas:
 CBD: Paseo de la Castellana (CBD)
 Calle Serrano and Calle de José Ortega y Gasset (the
Golden Mile)
 High-speed AVE rail network hub
Page 114-115
 Second largest city in Spain
 Population: 1.6 million (4.5 million metro area)
 On the Mediterranean coast
 Prime areas:
 Avinguda Diagonal
 Passeig de Grácia
 “2014 European Capital of Innovation Award”
 Center for art, architecture, and design
 Official language is Catalan
Page 114-115
Doing Business in Spain
Take the time to develop a relationship
Loyalty is to the individual, not the
Saving face is important
Observe body language
Page 116
Beyond the Basics
Intense Madrid and Barcelona rivalry,
don’t make comparisons!
Castilian official language of Spain, but
other official languages:
 Catalan in Barcelona, Valencia and the
Balearic Islands(not a Spanish dialect)
 Galacian (Gallego) in Galicia
 Basque (Vasco) in Basque country
Page 117