The 'Top 25 Global Real Estate Markets in 2020’ index is a guide to help kickstart your real estate investments by overcoming that first and most important step in the process — figuring out the best country to buy and invest in today.
Real estate is the most fundamental building block to growing your wealth and building a diversified, cash flowing portfolio. That said, the many benefits to real estate investing are only amplified when you start to look at opportunities abroad.
With international real estate, you get the higher growth potential and lower costs of emerging economies while also realizing greater diversification from different asset types, markets, geographies, currencies, etc.
Yet, the asset class has remained notoriously inaccessible and difficult to navigate.
The 'Top 25 Global Real Estate Markets in 2020’ aims to simplify that by helping you overcome the initial step in the process — figuring out the best country to buy and invest in today.
There’s a vast universe of foreign markets to choose from, so narrowing it all down can be a daunting endeavor. Fear not! The index has already done a lot of the legwork for you, aggregating and crunching tons of data to create a shortlist of the top market opportunities from all around the world!
How Did We Determine the Ranking?
The abundance of data and available sources out there can be difficult to make sense of.
To cut through the noise, we asked ourselves — what are the key characteristics that we look for when evaluating whether a market is investable (or not)? We mapped those out to establish a representative set of criteria for measuring and comparing each country on.
|GDP Growth||10%||A broad measure of productivity showing the trajectory of an economy. We are looking for the strong and steady growth that will enable income accumulation and demand for real estate. This score is calculated based on the average GDP growth rate over the past 5 years (World Bank Index, 2013-2019)|
|Cost of Living||10%||The amount of money needed to sustain a certain standard of living provides a view into expected day-to-day expense levels and how far your money will go.|
|Visas + Citizenship||10%||Flexible rules around visas, residency, citizenship, and foreign investment can dramatically simplify the implementation and management of a property investment.|
|Currency||10%||Foreign exchange movements have a substantial impact on your investment’s performance. Slight fluctuations can make or break your ROI. The index scores each currency based on 1-year performance against USD (Mar 2020). Those dropping in value receive higher scores as that represents strong buying opportunity.|
|Property Prices||10%||A baseline for comparing average property price levels across different markets. Cheaper prices are scored higher given they offer strong value opportunities.|
|Rental Yield||10%||A baseline for comparing typical rental yields, providing a rough estimate of expected rental income levels across various markets.|
|Capital Gains Tax||5%||The estimated tax you can expect to pay on the proceeds of any future sales of your properties.|
|Rental Income Tax||5%||The estimated tax you can expect to pay on any recurring rental income from your properties.|
|Transaction Costs||5%||The estimated total roundtrip cost of buying and selling a property, including transaction taxes and fees, legal charges, agent fees, etc.|
|Rental Laws||5%||Local legal systems will drastically impact your risk and ability to operate a rental property. The index utilizes Global Property Guide’s ratings to gauge how a country favors landlords vs. tenants. The higher the score, the more pro-landlord.|
|Foreign Visitors||5%||Foreign visitors drive demand for short-term rentals. More tourists mean a greater pool of prospective tenants for your investment property. (UNWTO, 2019)|
|Tourism Growth||5%||Beyond the absolute # of visitors, the rate at which tourism is growing or contracting helps us understand how a market is trending over time. (UNWTO, 2019)|
|Political Stability||5%||Gauging broader political and social stability helps us balance the high-growth potential of an emerging markets with its corresponding risks and uncertainties. (World Bank Index, 2019)|
|Regulatory Quality||5%||Markets more friendly to foreign investment and business will help simplify the logistics of an investment and create the underlying conditions to nurture a dynamic and growing economy over the long-term. (World Bank Index, 2019)|
Out of a total possible score of 100, each individual measure was assigned a weight based on its relative importance. For instance, ‘GDP Growth’ was given 10 points, which accounts for 10% of the overall score.
Note: the higher the score, the more positive.
How the Indicators are Calculated
For each measure, we aggregated data from an array of sources and applied a suitable methodology for that particular data type (each described in the table above).
For example, on "GDP Growth" we calculated the score based on the average growth rate of a country over the past 5 years (source: World Bank Index, 2013-2019).
Rather than using only the most recent year, which could have potentially been an outlier, we lengthened the time horizon in order to get broader context of a country’s performance.
In this case, we felt the most recent 5 years was a significant indicator of a given country’s growth trajectory.
While that approach was applied for "GDP Growth", other measures required their own tailored methodologies to best understand performance for that specific measure (i.e., Currency, Property Prices, Regulatory Quality, etc).
Getting a Relative Comparison Between Countries
We needed to understand how a market performed relative to all of the other countries, so we could easily and consistently compare them.
To do this, a country was scored based on how they performed relative to the upper and lower bounds of a given dataset.
For example, if the highest "Rental Yield" was 8% and the lowest was 1%, then a given country’s score would be calculated relative to those upper and lower bounds.
- Relative Score = (Value - Min Value) / (Max Value - Min Value)
So, a country with a ‘Rental Yield’ of 5% would ultimately receive 5.714 points for that measure.
- 0.5714 = (5% - 1%) / (8% - 1%)
Then, as ‘Rental Yield’ has a weight of 10 points within the index, we’d multiply that Relative Score by 10 to arrive at an index score of 5.714 for that measure.
Macro Data is Only the Initial Step
One thing to keep in mind — this is a country-level analysis and intended as an initial guide to help pinpoint compelling markets abroad.
As you drill down further and research particular cities and neighborhoods, the data will inevitably evolve. For instance, a local jurisdiction may have additional state and/or city-level taxes that further impact income on rental properties.
The index is meant as a starting point to pinpoint leads for further evaluation.
From Picking a Country to Buying a Property
While the ’Top 25 Global Real Estate Markets in 2020’ index is a great starting point, there’s a lot more to it. Once you get a sense for which countries pique your interest, the next step is to dive deeper into those markets and begin evaluating which cities and neighborhoods might offer profitable opportunities.
Here at Remote Ventures, we’ve developed a free online course to walk you through step-by-step on how to start investing in international real estate — Global Real Estate Investing: The Ultimate Starter Kit.
The course will break down the frameworks, strategies, and tactics to help take you through the entire investment process from start to finish — how to scout and choose a foreign market, find up-and-coming neighborhoods, identify and analyze properties, close deals, and turn them into cash-flowing investments.
You can sign up today while the course is 100% free and get lifetime membership. Check it out here — realestate.remoteventures.com
Remote Ventures is an international real estate investment company building software to help you scout foreign markets, find up-and-coming neighborhoods, identify and analyze properties, close deals, and turn them into cash-flowing investments.
Sign up for our free 12-week real estate course here — realestate.remoteventures.com
Stay in the loop with the latest updates and investment opportunities by subscribing to our private mailing list.