As the potential for turning a profit in Europe’s more traditional real estate markets evaporated, due to yield compression and increased competition for deals, many investors ventured east in search of higher returns. But as dark economic clouds loom over Europe, the risks of investing on Europe’s periphery are becoming more evident by the day.

Even before the advent of the global financial crisis, profit margins had begun to decrease in some of the more mature western European economies. Wage levels and manufacturing costs were on the rise. The scarcity of skilled labour and underdeveloped infrastructure was clogging trade. And inflationary pressures were starting to create problems in a number of European economies. Faced with these tougher market conditions, Europe’s periphery became increasingly tempting.

HOME TO ROOST?

Over the past few years, Foreign Direct Investment (FDI) has increased the furthe