Ireland, Netherlands and Portugal best for buy-to-let

Ireland, the Netherlands and Portugal are the best for buy-to-let in Europe, according to new research.

Ireland has overtaken the Netherlands to become the number one destination on the continent for landlords looking for rental returns. Ireland’s jump from 10th to pole position in the research by World First is fuelled by its rising average yield of 6.54 per cent, up from 5.34 per cent earlier in the year.

Indeed, the average rent for a one-bedroom apartment in an Irish city is now over £11,000 a year, making it the second most expensive country to rent in Europe, after Luxembourg, which costs city renters over £14,000 per year. In contrast, buying a one bedroom apartment in Ireland costs around £148,000 on average, more in line with its European counterparts.

The country’s appeal for investors of all types has increased significantly in recent years, with Ireland’s economy becoming one of the fastest growing in Europe and its property market the sixth fastest growing in the world. With spikes in searches for Irish citizenship following the UK’s Brexit vote, the potential for the country’s population to grow and further strengthen its buy-to-let investment returns is high.

The Netherlands and Portugal are the next European hotspots with average yields of 6.35 per cent and 6.33 per cent respectively. Both countries have “relatively low property prices compared to the rest of Europe”, notes World First. Portugal, in particular, is enjoying a steady real estate recovery this year, with the country regularly ranking in TheMoveChannel.com’s 10 most popular destinations.

The report comes as the UK Government has announced further changes to its buy-to-let market, ahead of the 2016 Autumn Statement, with tougher affordability criteria for landlords in the UK and reduced high loan-to-value mortgages available for these purchases, as new powers for regulating lending are given to the Bank of England.

The UK rose six places from 21 to 15 on World First’s list, thanks to slowing house price growth, which has helped to improve potential yields for investors. Sitting at the bottom of the table, Sweden, Italy and France provide the lowest returns on buy-to-let with high property prices and rents that “fail to make the investment worthwhile”, says World First.

 

The Netherlands: Europe’s top buy-to-let hotspot

16th May 2016

The Netherlands has been declared Europe’s best buy-to-let hotspot.

The study, carried out by currency experts World First, highlights the Dutch property market as particularly favourable for investors seeking strong rental returns, thanks to the country’s “relatively affordable” property prices. The average one bedroom apartment costs just over £110,000 and a three bedroom house costs around £211,000. In the UK, the average price of a one-bedroom apartment is £179,000 and a three-bedroom house is £343,000.

The research arrives as property investors could be put off by the new stamp duty increases for buy-to-let property in the UK, with a 3 per cent surcharge now applying to all additional home purchases. Indeed, a separate study from PropertyLetByUs found that one in four landlords are now considering investing in overseas property to avoid the new tax.

France took was top of investors’ wish list, highlighted by one in five landlords (23 per cent). Spain came a close second (18 per cent) followed by Italy (11 per cent), Bulgaria (3 per cent) and Germany (1 per cent).

The Netherlands, though, may be the underrated hotspot investors should be considering, offering a rental yield of 6.57 per cent in April 2016 – the highest in the EU.

Belgium and Portugal are also attractive locations for buy-to-let investments, according to World First, taking second and third respectively in the EU buy-to-let league table.

Savvy investors may be advised to steer well clear of buy-to-lets in Sweden, France and Italy which offer the lowest returns on buy-to-let investments, suggests the World First study. Sweden, in particular, has yields lower than 3 per cent due to rental controls and a market that favours tenants. France (3.22 per cent) and Italy (3.55 per cent) – already established hotspots for holiday homes – also have lower rental yields than their European neighbours and while they may make a great retirement or summer home for sun-seekers, they may not be ideal locations for buy-to-let investors, argues the report.

The research also reveals slight differences when investing in buy-to-lets in city centres compared to suburbs and rural areas. For buy-to-let in city centres, Belgium takes the lead with yields of 6.54 per cent. This is partly due to the dominance of Brussels as an expat destination for those working at or within the European Parliament, European Commission, Council of the European Union, and the European Council.

For properties outside the city centre, the Netherlands again has highest yields (6.78 per cent), closely followed by Turkey (6.65 per cent) and Portugal (6.57 per cent).

Edward Hardy, Market Analyst at World First, comments: “With the recent changes to stamp duty tax for buy-to-let landlords, UK property investors looking to add to their portfolio might want to consider looking further afield to get the best returns. Our research shows that within the EU, the Netherlands, with relatively affordable property prices, holds the highest level of returns in Europe. On the other hand, countries that have policies in place to regulate rental prices like Sweden and Germany offer relatively low yields for investors.”

“Our research also shows that locations which may be appealing to British tourists aren’t necessarily the best options for property investors to get the most from their investments. Popular tourist and expat destinations like France, Italy and Spain rank relatively low on our buy-to-let scale,” adds Hardy.

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