Ireland has best buy to let rental yields in Europe, new research shows
Ireland has the highest rental yield for buy to let property in Europe at 6.54%, moving from tenth place to top of the sector league table.
In second place is the Netherlands at 6.35% then Portugal at 6.33% then Belgium at 6.32% and Hungary and Turkey both at 6.32%, according to the index from international money transfer firm World First.
In seventh place is Bulgaria at 6.04% then Malta at 6.01% and Latvia making up the top 10 at 5.94%. The UK, which has seen a rise in buy to let landlords in recent years is fifteenth with 4.91% and the bottom three out of 29 countries covered by the index is Sweden at 3%, Italy at 3.26% and France at 3.55%.
With Ireland becoming one of the fastest growing economies in Europe and the sixth fastest growing property market in world, the country is continuing to attract new investment and residents, bolstering its rental market and making it the ideal location for a buy-to-let investment, the research report says.
The average rent for a one bedroom apartment in an Irish city costs 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 sits more in line with its European counterparts, costing a modest figure of around £148,000 on average and a three bedroom apartment house costs £285,000 on average.
The Netherlands and Portugal both have relatively low property prices compared to the rest of Europe, offering buy to let investors a cheap investment with high returns from profitable rental costs, the report points out.
The UK has climbed six places from 21 to 15 on the list despite major changes in the buy to let market with higher property tax already introduced and tougher buy to let mortgage rules due to take effect at the start of 2017 and mortgage tax relief change due in April next year.
The report suggests that those countries sitting at the bottom of the table, Sweden, Italy and France, provide the lowest returns on buy to let as high property prices and rents mean the investment fails to be worthwhile.
The analysis also shows the gap between rural and urban investment for buy to let in Europe and identifies which areas will see their stake go further. The rural urban gap is most prevalent in Turkey where average yields in rural areas are 6.70%, dropping to 5.71% in areas outside the city. This is unsurprising given the high area cost of Turkish city apartments which are £635 more per square meter than outer city properties, putting city living at the highest premium in Turkey.
In contrast, buy to let investors can see the least significant variances in Greece where the average yields are similar some 4.48% in urban areas and 4.41% in rural areas, offering comparable returns on investments. In Greece, the cost per square meter is just £108 higher for city properties than in the outer city.
‘The stamp duty surcharge which came in this April put a sting in the tail of buy to lets in the UK, but the government’s decision in the build up to the Autumn Statement which will limit the number of high loan to value mortgages available to those investing in buy to let or second properties has been the final icing on the cake,’ said Edward Hardy, market analyst at World First.
‘Therefore savvy investors need not look too far afield for great returns. The resurgence seen in the Irish economy over the past few years has buoyed its property market and in particular its rental sector. The arrival of global tech giants like Google, Facebook and Microsoft have pushed rent prices up creating attractive yields for buy to let investors,’ he explained.
‘For UK investors, it is also important to take into account how currency swings could affect your yield. The fall in Sterling following the European Union referendum will make it more costly to buy property abroad but will also mean a higher rental income. Active planning will be key to ensuring any foreign buy to let investments get you bang for your buck,’ he added.
