UK falls 10 places in European buy-to-let rankings

The challenging environment facing British landlords has seen the UK drop down the rankings of best places to invest in property in Europe.

New research by payments group WorldFirst has seen the UK dropping 10 places in the European buy-to-let rankings in just 12 months - from 15th place last year to 25th place this year.

Which countries top the leaderboard?

Yields in Ireland are the highest in Europe, with the average return increasing from 6.54 per cent to 7.08 per cent in a year.

Malta, Portugal, Netherlands and Slovakia emerged as the next European hotspots, with yields of more than 6 per cent. All four countries have relatively low property prices, but high rental averages provide the chance to earn a decent income.

Sitting at the bottom of the table are Sweden, Croatia, France and Austria, all providing returns of less than 4 per cent due to high property prices and stagnant rents, with Sweden taking last place due to its tightly controlled rental market.

2017 rank Country Average rental yield (%)
1 Ireland 7.08
2 Malta 6.64
3 Portugal 6.43
4 Netherlands 6.27
5 Slovakia 6.12
6 Belgium 5.96
7 Turkey 5.91
8 Bulgaria 5.77
9 Cyprus 5.70
10 Hungary 5.59
11 Latvia 5.44
12 Spain 5.39
13 Poland 5.34
14 Romania 5.17
15 Denmark 5.08
16 Slovenia 4.59
17 Estonia 4.55
18 Finland 4.52
19 Czech Republic 4.47
20 Greece 0.044
21 Lithuania 4.22
22 Luxembourg 4.21
23 Italy 4.08
24 Germany 4.03
25 UK 4.00
26 Austria 3.91
27 France 3.82
28 Croatia 3.82
29 Sweden 3.03

Tax changes to blame for UK’s drop?

WorldFirst’s Edward Hardy said: “The correlation between a country’s housing sector and the health of the wider economy is clear.

“It may now be the case that the deteriorating dynamics of the UK’s rental market is sounding the alarm for a wider slowdown in residential housing and thereby broader economic wellbeing.”

The recent tax changes inflicted on British landlords include a 3 per cent stamp duty surcharge on all investment properties and a crackdown on the tax relief that they can claim on buy-to-let mortgage interest.

At the same time, British property investors have also seen mortgage lenders tighten their requirements, demanding more rent to cover buy-to-let mortgage payments.

This all comes as the UK tries to negotiate its exit from the European Union, with the pound tumbling in value.

With all of these changes happening, the average yields on British buy-to-let properties has dropped from 4.91 per cent to 4 per cent in the past year.

High returns still to be found across the country

However, it is not all bad news for British property investors. While yields can be less than 2 per cent in areas such as the South East and London where house prices tend to be higher, there are still opportunities for significant returns.

This is particularly the case with multiple tenancy agreements where landlords can earn returns closer to double figures, especially in some areas further north.

Search out the opportunities and attractive rental yields are still for the taking among British landlords. If you need somewhere to get started, check out our article on the best buy-to-let areas in the UK 2018.

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