Israelis Eyeing European Real Estate Beyond Germany
Germany, once a prime destination for Israeli real estate investors, has fallen off the radar, according to a report by Globes' "Kesef BeKir" podcast. While Germany offers stability and a strong economy, its market is currently not suited for those seeking quick, high returns. Matan Kessler, who manages the Israeli operations of Inspiration Group, notes that Germany's market is characterized by "what you see is what you get" stability, with less political fluctuation than Eastern European nations. However, the German economy has faced recent challenges, including the impact of the war in Ukraine, leading to interest rate hikes, labor shortages, and a subsequent 15-20% drop in property prices over the past year. The typical investor profile in Germany now leans towards older individuals, aged 45-60, who have already accumulated wealth and are seeking diversification.
Kessler also highlighted significant regulatory hurdles in Germany, particularly concerning tenant rights. German rental laws make it extremely difficult to evict tenants, even for personal use, which can drastically affect property value. Properties with existing tenants can be half the price of vacant ones. Assaf Oni, Globes' European correspondent based in Berlin, described the city as "hostile to investors" due to strict regulations that make it challenging to achieve consistent returns. Many investors are reportedly moving to other destinations.
France, in contrast, is presented as a potentially overlooked investment opportunity. Lawyer Gregory Weitz, who has invested in Nice, points to France's economic stability, well-defined laws, and the possibility of up to 100% financing as key advantages. While high leverage means returns are calculated differently, the focus is on long-term stability rather than quick profits. Property prices in Nice have seen a modest average annual increase of 3% over the last five years. Weitz also noted that French real estate transactions are transparent, with clear rules for brokers and binding offers once a price is agreed upon, subject to mortgage approval.
Despite these advantages, Israeli investors have been hesitant to invest in France. Weitz suggests this may be due to perceptions of the country's political leanings and the presence of Muslim immigrant communities, though he believes these concerns are localized and do not affect desirable areas like the French Riviera. He also mentioned that while 100% financing is available, a 20-30% deposit is typically required as collateral. Tax regulations in France include a purchase tax of around 8%, rental income tax, and a capital gains tax that can be waived after 22 years of ownership. The article concludes by emphasizing the need for investors to thoroughly understand local rules, whether in Germany's strict rental market or France's financing and tax structures.
