After the dark days of COVID, tourism to the EU is booming again; overseas visitor numbers are 22% higher than a decade ago. Good news for local economies, even if the residents of Mallorca, Tenerife and Athens appear less than delighted.
One country that seems particularly smitten by Europe’s charms is the USA. The number of Americans choosing to holiday on the continent has grown by two-thirds since 2013. Portugal alone saw over 2m American tourists last year, making the USA as important a source of business as Spain or the UK. (By the way: you can safely ignore the myth that only 10% of Americans hold a passport. The real figure is closer to 50%, or about 160 million people.)
Airlines are rushing to meet this increased demand. United, for instance, now offers nearly 19,000 scheduled flights to Western Europe over the summer season, with new routes including Washington to Berlin, Chicago to Barcelona and Newark to Malaga.
From tourists to buyers
Americans aren’t just visiting Europe. They’re purchasing properties here too.
Our friends at Henley & Partners say more Americans are applying for residence by investment programmes than any other nationality, with enquiries running at record levels. The golden visa schemes in Spain and Portugal have proved immensely popular (so popular, in fact, that they’re now being amended). Home sales in Spain to Americans have nearly doubled since 2019, while the number of US citizens living in Portugal has increased by 240% since 2017. Elsewhere, American nationals now account for 25% of foreign transactions in Greece and – according to one source – 4% of all transactions in Scotland.
Of course, the impact this has on the ground shouldn’t be exaggerated. As Nigel Hindle, co-founder of Hindle Baldock and PV International’s associate for the South of France, points out: “We are seeing an increase in interest from Americans. However, the British, Dutch, Germans, Belgians and Scandinavians still represent the overwhelming majority of foreign buyers on the Côte d’Azur.”
But there’s clearly something afoot.
What’s driving this increase in appetite?
One obvious factor is skyrocketing wealth. The total net worth of America’s top 1% has tripled since the Financial Crisis and now stands at nearly $50 trillion. And wealth in the USA runs deep: some 5.5 million people hold at least $1 million in liquid investable assets. That’s a lot of financial muscle, and it’s accentuated by the strength of the dollar.
The greenback now buys 30% more euros than it did 10 years ago, making European property feel highly affordable. Some are viewing this as an opportunity to diversify their investment portfolio. We heard recently of an American couple who have bought houses in seven different countries in the past 18 months – and are keen to buy more.
Americans don’t just have the money; they have economic incentives too. House prices in the USA have surged in recent years and mortgage rates are generally much higher than in Europe. You can throw into the mix some attractive tax advantages. Certain countries are aggressively targeting retirees from nations with which they have a tax treaty (like the USA). If you move to Italy, you’ll pay a flat 7% rate on all foreign-source income for the first 10 years. The same rate applies in Greece, with the benefit lasting for 15 years.
Ireland and Scotland, meanwhile, appeal for different reasons: the strong pull of ancestry, a shared language, shorter flight times, the lure of space and privacy. According to Matthew Sinclair, Director at our Scottish associate Saint Property, there are more subtle motivations too: “You may laugh, but many raise climate and climate change as a reason to exit the USA during the searing heat of summer.”
A different kind of buyer
Most American money is still being spent in the usual places. The super-wealthy continue to be drawn to exclusive townhouses and apartments in Europe’s great cities, countryside estates or luxury villas near the coast.
For the ‘merely affluent’, purpose-built developments (often centred on a golf course) remain an attractive option. American firms clearly believe there’s a big market for these projects; witness Discovery Land Company’s proposal to redevelop the Taymouth Castle estate in Perthshire, complete with 167 new homes.
But we’re also seeing new trends appear. The first stems from the wave of American companies, especially in technology, opening major operational centres in Europe. Sparked by Google setting up its European cybersecurity HQ in the city, Malaga has become a hi-tech hot-spot. As Luke Davis of Propana Group, PV International’s associate for the South of Spain, says: “Many of these companies are relocating staff from the US and a lot of the executives are buying property, especially on the Golden Mile which runs between Marbella and Puerto Banus. There’s also been a high number of purchases in gated developments like La Zagaleta in Benahavis.”
Nicola Williams at Bergins Property Consultants in Ireland tells the same story: “Expats posted here with American multinationals have started buying, which is a new phenomenon. They view the Irish property market as undervalued compared to home, with the possibility of making a decent profit when it’s time to sell.”
The second trend is still nascent, and more evident in the mid- than the top market. Reflecting a re-ordering of priorities since COVID, there’s been a small but pronounced uptick in the number of 25 – 34 year old American buyers. As they embark on parenthood, this group is looking for less hectic, more rewarding lifestyles – and perhaps safer ones too, given the febrile state of American politics and society. Changes in working patterns (and new types of visa) also make it much more feasible for these so-called digital nomads to spend part of the year in Europe.
As a case in point: you may well have read about the ‘homes for €1’ scheme in Sicily’s Sambuca di Sicilia, so successful that a third wave of sales has just been announced. What’s less well known is how popular it’s proved with Americans. As CNN reports: “Most of the people who’ve been attracted to this remote spot are from the USA. Sambuca now boasts a ‘Little America’ and has opened remote-working spaces to pull in digital workers.”
Buying wisely
We’re firmly of the view that overseas ownership will accelerate fast over the next five years. Americans will be prominent, but demand will come from every corner of the world (most definitely including the UK).
As always with property, there’s a fine balance to be struck between investment and lifestyle needs. Europe offers rich opportunities on both counts, but buyers need to consider the challenges as well as the rewards. Unless they’re focused on developments targeting an international clientele, they’ll be confronted by the unfamiliar (and sometimes frankly Byzantine) property practices that prevail in many markets.
Getting things wrong is alarmingly easy and can be financially and emotionally costly, so buyers should seek knowledgeable and impartial advice wherever possible.
