Cheap Investments in Europe outside of The Eurozone

When you compare two famous European cities, Bratislava and nearby Vienna, in many ways, the two cities, the world’s closest two national capitals, are worlds apart. 

Bratislava has been the butt of jokes for years, while Vienna is cited as one of the most beautiful cities in Europe. However, while we put Bratislava in the “underrated” category, it’s not the most exciting city, and it’s not a place we would recommend dropping everything to move to.

Certainly not, with nearby cities in the Czech Republic and Poland offering some of the cheapest living in Europe.

Part of the reason we wouldn’t recommend Bratislava is that it’s not exactly inexpensive. No, it’s not nearly as bad as socialist Denmark, but it is not as reasonable as Prague or Warsaw.

The reason for the higher prices and higher cost of living in Bratislava is simple: the Euro currency.

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Euro Appreciation 

In the past, we suggested investigating an investment in Lithuanian real estate as a way of taking advantage of Euro appreciation.

Historically, almost every country adopting the Euro currency sees real estate prices increase. In Italy, prices in some areas doubled in just a few years. The average price increase in Estonia was nearly 60% just three years after Euro adoption.

Estonia’s neighbor Latvia also saw Euro-based real estate appreciation when it dropped its Latvian currency in favor of the Euro in 2014.

The strength of the Eurozone has helped make a lot of European property owners wealthy merely by dropping their disastrous currencies in favor of the Euro. Remember the days when $1 used to buy thousands of Italian lira?

However, countries that adopt the Euro also see pricing increases across the board. In the Eurozone’s emerging markets, including Slovakia, there were plenty of complaints from locals about how prices have gone through the roof once the Euro became the national currency.

Doing business in the Eurozone makes things more expensive, and the cost of operating under the European Union banner drives up prices. Historically, shop owners tend to take advantage of the situation when countries switch from a national currency to the Euro.

It may seem simple, but a Coke that used to sell for 60 cents denominated as 15 units of some local currency doesn’t seem unreasonably priced as 80 euro cents. It seems downright cheap. 

Anecdotal examples like this are much of what locals complain about.

While some property owners get rich when the Euro comes to town, buying property after the post-Euro appreciation has played out can be rather expensive. And as an investment, it can be weak.

For example, only two countries in the Eurozone made the Nomad Real Estate Index top 20: Cyprus and Latvia.

Countries like Georgia, which uses its own Georgian lari, offer gross yields much higher than their European neighbors. Look across Europe, and you’ll see that some of the best markets for investment and living are European Union members that do not use the Euro as their currency. 

Central Europe

It’s true that Poland recently dipped its hands into private pension funds under the guise of “pension overhaul.” While that shows that the Polish government isn’t exactly the most honest, it simply puts them in the league with… well… every other government.

Confiscating retirement accounts the way Poland did is not likely to lead to expropriation of real property from the private sector, and property prices in Poland are substantially lower than where they were several years ago. We are not necessarily recommending buying there, but your dollar will buy more property in Poland than in most neighboring countries using the Euro.

Also, Poland is an excellent place to live if you lead a location-independent lifestyle and want to live in Europe. Prices in Poland are downright cheap. You can eat out every day without paying much at all.

The Czech Republic, which uses its own Czech korun instead of the Euro, replaced its flat tax with a progressive tax scheme in 2021. Prague is still a haven for entrepreneurs, boasting a robust start-up scene.

Brno, the country’s second-largest city, you can find decent flats selling for around $150,000. On the whole, the Czech Republic is the only non-Eurozone country in central Europe with anemic rental yields, but there are pockets that offer good returns.

For real estate investors, there are certain areas that are prime territory for the many students who come from around Europe to study, lulled in by Prague’s reputation as one of Europe’s most beautiful cities. There is also a tourist rental market, where property owners cash in on the country’s bustling year-round tourist scene to rent apartments for five times what they’d rent to locals.

Prague is a city that, if you know what you’re doing, could be a good place to play a game of real estate arbitrage. Flats near the city center are cheap compared to what similar real estate would cost in other highly touristed European capitals.

You can rent a nice apartment a few kilometers outside Prague’s city center for around $600 – $900 a month; for three bedrooms, prices start around $1,000 – $1,500. That means you could live on the cheap while renting out property you purchased for cheap for high prices.

Southeast Europe

Obviously, the further away from “developed” Europe you go, the better the potential opportunities. Slovenia’s neighbors in southeast Europe boast even better potential returns as well as a promising start-up scene of their own.

Montenegro is one country which many suggest offers a lot of promise. While it still has a lot of conditions to satisfy, Montenegro is currently on the path to European Union ascension. That is part of the reason why investors, including wealthy Russians, have snapped up real estate along the country’s gorgeous Adriatic coast.

While Montenegro already uses the Euro as its currency despite lacking European Central Bank approval, investors believe Montenegro’s entrance into the European Union could cause huge property gains.

Romania also offers excellent returns on rental property as well as a cheap, highly educated workforce that has drawn employers to tap Romanian talent, especially in the tech space. Romania has some of the world’s fastest internet speeds and is one of our favorite places to hire talent. 

Other European countries like Hungary and Serbia are cheap alternatives to countries using the Euro. While it’s hard to compare Serbia to the United Kingdom, the opportunities in these non-Eurozone countries are superior partly because they haven’t jumped on the Euro bandwagon.

As in the real estate example, we believe these countries’ future adoption of the Euro could bring outsized gains in some sectors, but we also believe it would likely be wise to take those profits off the table once that happens.

Taking advantage of these countries’ presence in Europe at lower price points than Eurozone competitors is an interesting mid-term strategy to evaluate for living and investing.

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