Comparing European and American Real Estate Markets: A Look at Entry-Level Accessibility

As first time buyers, it is important to consider the challenges that exist when trying to break into the market. Over the past few decades with climbing inflation and property prices, the real estate arena has become more and more difficult to enter. Even in two of the world's most affluent regions, Europe and the USA, real estate has become almost impossible for new home buyers to get involved. Trends like remote work, the impact of a worldwide pandemic and moving abroad have caused a significant wave of competition in the world of real estate. In this article, we’ll take a look at some of the comparisons between the European and American real estate markets as well as how alternative real estate investment options could offer the perfect solution to a growing problem.

Initial Investment

Getting started might be the hardest part. Saving up to put down a deposit on real estate has become a harder and harder thing to do in the last few decades. With soaring inflation and property prices in most major cities worldwide, the accessibility of the “entry-level’ real estate market has essentially become inaccessible. If we compare Europe to the USA, in Europe, the average initial investment required to purchase real estate is higher than that in the USA. For instance, according to a 2019 report by Eurostat, the average price per square metre for an apartment in the European Union was approximately €2,276, while it was only €1,290 in the USA. The average rent in Europe is also up 18% and house prices 49% since 2010.?This means that even though prices are going up, buyers aren’t getting the same ROI for their properties as they used to. Coupled with the average increase in salary being outpaced by inflation almost everywhere in the world, it leaves us with a challenging issue.?

The table below demonstrates just how big the gap can be between income and affordability in some of the world’s most popular cities.?

This doesn't mean that there are no options for those looking to break into the real estate game. Advancements in technology and some creative minds have enabled new ways for people to buy in with less. Companies like Arrived have opened up the possibility to get involved with residential real estate at an entry-level. Want to look at things a bit bigger? Azqira lets you buy into luxury hospitality real estate from hotels all over the world for as little as €100, making the worries of initial capital a thing of the past!

Stringent Lending Policies

Ok. So you’ve found your dream starter home. You’ve done the math and it looks like you just might be able to pull it off. Now you have to go to the bank and get a loan. Roadblock!

Getting a first-time loan from a bank for your real estate purchase isn’t as simple as most might think and European banks tend to have stricter lending policies compared to their American counterparts. According to a 2020 report by the European Central Bank, the lending rate for real estate loans in the Euro area was 1.47%, compared to 3.06% in the US. Lenders in Europe may require a higher minimum down payment or have a lower debt-to-income ratio threshold.? So how do we get around these issues if the ability to buy real estate in cash is simply just not a possibility?

With fractionalised real estate, there’s no need to sign yourself up for a lifetime of debt. Platforms like Azqira allow you to buy in at your own comfort level and increase or decrease your input depending on your own preferences. With more and more of these kinds of services becoming available, the need to nervously apply for bank loans may soon become a thing of the past.

Limited Inventory

The global pandemic has created an unexpected trend in the world of real estate. With the growing popularity of accessibility to remote work, a large population of people have realised that they could actually live anywhere if they wanted to. As of 2022, 20% of remote workers from the US said they had relocated because of their ability to work from anywhere. This in turn has put tremendous stress on popular areas around the world as competition for real estate continues to grow. Europe has an extremely limited inventory of properties available for sale, especially in urban areas where most young people prefer to be. Places like London, Amsterdam and New York have become some of the most inaccessible real estate markets in the world. Coupled with a growing global population, things are only going to get more difficult in the future for first-time home buyers.

So how do we buy into something that isn’t available? Well as it turns out, sharing is caring when it comes to fractionalised real estate. When properties can be virtually split up into fractions it means that there are more slices of the pie to go around. This increases availability and encourages more people to get involved.

Complex Legal Frameworks

European countries have complex legal frameworks that make investing in real estate a challenging process. Regulations can vary greatly from country to country, and those who want to buy in must have a good understanding of the legal system in the specific region in which they plan to invest.?

For many people, a stack of complicated paperwork can be an intimidating and daunting prospect to overcome and when it comes to cross-border red tape and regulations, sometimes things can get too much to bear. Time can also be an issue when purchasing real estate. The whole process can literally take months.

Thanks to smart contracts embedded into the blockchain systems used by fractional investment platforms like Azqira , the majority of these issues fall away. There’s no need for paperwork. Transactions are secure and transparent. Red tape is removed no matter what corner of the globe you reside in and best of all. The whole process takes minutes, not months.

In conclusion. Being a first-time real estate buyer can be daunting. Whether it’s insufficient capital, high interest rates, limited availability or paperwork, it’s important to remember that the world is a dynamic place and where there is a need, there is an opportunity. Thanks to innovative platforms like Azqira that have introduced fractional investment into the real estate world, the opportunity to buy in has now become an option for young people once again.?So maybe it’s time to turn away from the competitive traditional real estate market and usher in a new era of property tycoons.