Real estate business and low cost airlines make a good deal

There was an interesting article in the Belgian newspaper ”Le Soir” ‒ LesoirImmo on Thursday 27 June 2013 on the interconnectedness between the so called low-cost companies and the regions where they operate. Here are some of the viewpoints mentioned in the article, which was written by Paolo Leonardi.

Experts dealing with EU issues and attending meetings in Brussels are used to landing in Zaventem, the airport located in the suburbs of Brussels. Belgium also has other airports and among them, one called ”Brussels South”, located near Charleroi, 65 km from Brussels.

You would think that it is located in the middle of nowhere. Indeed it is, but it is also very easy to reach the airport by car via the motorway. Or you can just step into a bus from the Schuman area (even after a beer in an Irish pub) or the South Station (Gare du Midi) and you will get to the airport at Charleroi for a low price.

There are three main companies operating out of Charleroi, Ryanair, Jetairfly and Wizzair, which are all low-cost companies. They carried more than 6.4 million passengers in 2012 of which 42 % were Belgians.

Here are the top five country destinations from the Charleroi airport:

• Spain: 1,800,000 passengers
• Italy: 1,600,000 passengers
• France (city of Carcassonne and Marseille): 600,000 passengers
• Morocco: 560,000 passengers
• Hungary: 308,000 passengers

These statistics have immediately generated interest among the real estate companies.

It is undeniable that the flight connections of the low cost companies shine a light on cities which are not well known by the tourists such as Pula and Rijcka in Croatia.

Every time a new route opens, there are opportunities to be exploited. Some time ago, Belgian property developers invested in Zakynthos and Ryanair opened recently a new connection to this Greek island. There is sometimes a demand from a country in deep crisis to be linked with other countries with low cost flights due to the fact that tourists bring in an inflow of foreign currency.

Vice versa, where there is a low-cost destination, the region can develop quickly due to it. Real estate prices rise accordingly. Low-cost destinations are really attractive for people wanting to buy a summer residence or an apartment which they could not afford in their own country. A lot of English people have invested in France because they did not have similar purchasing power in England.

In June new routes to Montenegro were opened from Charleroi. They will for sure have an impact on the development of that region as well.

However, risks and uncertainty exist. Here are some of them:

• Real estate bubble:

In Spain, buyers will have to wait at least ten years before getting back the value of their investment and in the meantime, rental incomes are going down.

• Strong currency:

Retired English people lost a lot when their national currency was depreciated. It was also a loss for all the resort property companies who counted on temporary residents who will no longer come.

• Sudden changes or critical financial situation of the flight company:

Everybody knows the very distinct character of Michael O’Leary, the boss of Ryanair who has not hesitated in suspending the flights to Marseille in France because of a conflict with trade unions. Or other flight companies which have stopped flying to a destination due to a lack of profitability. Between February 2012 and April 2013, nine European airline companies went bankrupt and among them Spanair, Air Madrid and Iberworld Airlines.

• Collateral damages from a disaster:

Disasters such as the sinking of the Costa Cruise or the tsunami in Thailand may contribute to a complete change of a sector or a country. A major climate event, an airplane crash or an act of terrorism can damage a tourist destination.

• Political instability of a country:

The political situation can disturb the delicate balance between tourist places and airline connections, as is the case in North-Africa and Middle-East. Some people are really cautious at the moment concerning Morocco or Turkey, although it seems that there is a real estate boom in those countries.