Sarah Beeny’s estate agency, Tepilo, looks at some of Europe's top destinations for investing in buy-to-let.
The best locations to invest in abroad
As a landlord or property investor, you might feel you have been unfairly targeted by the British government in recent times – with a raft of tax changes and legislation designed to make investing in buy-to-let property more unappealing,
In 2016, we saw the introduction of the additional 3% stamp duty surcharge on second homes and the changes to the Wear and Tear Allowance. What's more, mortgage interest tax relief will be phased out from April 2017, while the recent Autumn Statement outlined tougher lending criteria for buy-to-let landlords.
All this might make investors feel a bit under-appreciated here in the UK. As such, they might look to invest elsewhere.
Investing in property abroad has long been a favourite British pastime, but where are Europe's current buy-to-let property hotspots?
According to the latest European Buy-to-Let League table from World First, top spot is taken by somewhere pretty close to home: Ireland, which had the highest rental yields (6.54%) in Europe in November 2016.
In second place was The Netherlands (6.35%), closely followed by Portugal (6.33%). Belgium, Hungary, Turkey, Bulgaria and Malta also offered yields of over 6%.
On the other hand, Sweden (3%), Italy (3.26%) and France (3.55%) were rooted to the bottom when it comes to returns on investment.
Although the UK climbed six places – up from 21st to 15th place – the average rental yield is still only 4.91%, below Romania, Denmark, Latvia, Slovakia and Poland, and just above Spain, Czech Republic, Estonia and Greece.
Ireland, which has one of the fastest growing economies in Europe and the sixth fastest growing property market in the world, has recovered extremely well in the years after being bailed out by the Eurozone in 2010. As a result, the country continues to attract investment and new residents, thereby further boosting its rental market and making it ripe for buy-to-let investment.
Yields are good because property is much cheaper to buy in Ireland than the UK – a one bedroom house, for example, would set a buyer back around £148,000, while a three-bedroom apartment has an average price of around £285,000.
At the same time, rents are very high, with the average rent for a one-bedroom apartment in an Irish city costing over £11,000 a year. This makes it the second most expensive city for renters in Europe after Luxembourg.
The Netherlands and Portugal have also emerged as buy-to-let property hotspots thanks to relatively low-house prices and good rental returns. Investment is cheap to begin with, but investors can also feel confident in receiving high yields – the perfect combination, in other words.
In Sweden, France and Italy, by contrast, property prices are high and rents nothing to write home about, which means that yields are much more squeezed. In the last European Buy-to-Let League table, back in April, Sweden, France and Italy made up the bottom three and very little has changed since then.
World First's research also highlighted the gap between rural and urban buy-to-let investment in Europe, with the rural-urban gap most widespread in Turkey where average yields in urban areas are 6.70% but drop to 5.71% in places outside of the city. This is of little surprise when you consider the cost of city apartments in major Turkish cities such as Istanbul and Ankara, which are £635 more per square meter than properties in rural areas.
In Greece, on the other hand, there is very little variation between rural and urban, with both offering very similar returns on investment (4.48% and 4.41% respectively).
Whether you are looking to invest abroad or in the UK, though, one thing is clear: property investment is comfortably the highest performing and most reliable investment class. Where once people put their money in pensions and stocks and shares, wealth is now far more likely to be tied up in property.
As long as you are offering good-quality, well-maintained rental accommodation, in popular and desirable locations, you should have very little issue in filling your homes with ease. Like anything, buy-to-let has its ups and downs, but the pros generally outweigh the cons and the rewards can prove very handsome.