Charting a Course for European Real Estate Investment

By Schindler, Martha | Journal of Property Management, January-February 1992 | Go to article overview

Charting a Course for European Real Estate Investment


Schindler, Martha, Journal of Property Management


American investors planning to take advantage of the anticipated boom in European real estate should study more than just a few phrases in French and Italian, according to the experts at the Arthur Andersen Real Estate Group.

Together with the London-based law firm of Nabarro Nathanson, the Arthur Andersen Group is advising would-be investors that, while the European market presents some very real investment opportunities, it also is rife with radically different trade and tax laws that could trip up American buyers.

To help American investors evaluate their opportunities, the Arthur Andersen/Nabarro Nathanson partnership has released a 168-page guidebook, entitled Building a Stake in Europe. The book lists the different tax and legal concerns of real estate investment for ten European markets, including Central Europe.

One of the dominant themes in this discussion is the establishment this year of the European Community and its single, common market, which is expected to create a wealth of opportunities in commercial, leisure, and industrial property investment. In addition, substantial improvements in Europe's infrastructure are expected to provide an added economic boost to the entire continent.

Right now, many European economies are in recession, with the typical accompanying flattening of property and other markets. For this reason, experts are advising American institutions hoping to cash in on the E.C.'s anticipated upswing to think about buying now, while building and land values in many countries remain low.

Timing is right

According to DAvid Sproul, a tax partner in Arthur Andersen's London office, 1992 will be a great year for Americans to invest in European properties. He cites a range of "solid, economic" opportunities for investors both conservative and daring: from property in established markets, like France and the United Kingdom, to markets with enormous growth potential, like Spain and Portugal, to the big question marks of Central and Eastern Europe.

"This enthusiasm is based on real strength," Sproul says. He notes that Europe's economic growth projections for next year and beyond average between 3 and 3.1 percent. This is well above U.S. rate of roughly 2 percent. All of the European countries are at or above 2.5 percent; some countries, like Spain and Germany, have much higher growth projections.

"Prices now are as low as they are likely to be for some time," says David Bramson, director of Nabarro Nathanson's property department. "Any industry that comes in will be welcomed with open arms. Doors will be opened at planning and zoning commissions for the best possible sites and the most competitive building contract prices.

"If you're trying to establish your place in Europe, there couldn't be a better time," he urges.

No single market

However, Sproul and others caution that Americans looking to cash in on the European boom should do some homework first.

The most important for American investors, Sproul says, is a simple one: Despite the establishment of the European Community and its common trade market, "There is no common European real estate market, no common set of real estate laws, no common building regulations, no common rules for planning--and there aren't going to be." Real estate simply is not covered in the E.C.'s single market rules, he explains.

One major exception to this rule is taxes, Sproul says. Experts are predicting that European real estate transactions, like all other international business conducted in Europe, will be affected by forthcoming E.C. Commission directives.

Specifically, the directives are expected to cover a range of direct and indirect tax issues, including the payment of dividends and interest and the handling of profits and losses. If adopted, the directives most likely will allow each E.C. member country to establish its own legislation in order to implement them. …

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