Mapped: European countries with the best buy-to-let income
Investors might be looking to increase their buy-to-let yields by searching for property outside London, but new research suggests the hunt should go well beyond British borders.
An average income yield of 4.3pc in the UK is far lower than the 6pc or more available in the Netherlands, Belgium and Hungary, according to research from money transfer company WorldFirst.
Buy-to-let investors in the UK are suffering under tax changes which include a 3pc stamp duty surcharge, implemented last month, and new tax rules being phased in from next year which will prevent them from deducting the cost of their mortgage interest from their rental income before calculating their tax bill.
According to the study, average yields in the UK, at 4.28pc, are lower than in 20 other European countries.
The highest yields are in the Netherlands, where investors can expect an average return of 6.57pc. Average property prices are very low – a one-bedroom apartment in the country costs around £110,000 and a three-bedroom house costs around £211,000.
The worst country to invest in buy-to-let is Sweden, where rent controls mean yields are as low as 2.88pc on average.
Rental yields vary wildly within the UK, and can be as high as 6pc in areas with lower property prices, such as the North West and Midlands.
However, a stricter tax regime and tightening regulation is likely to make it harder for landlords to purchase buy-to-let property, as the Bank of England consults on rules which will mean they have to pass stricter affordability tests.
The research also revealed that weakness of the pound – prompted by concerns over the EU referendum next month – had made property in Europe more expensive for British investors, and sterling could fall even further if Britain actually leaves the EU.
It can be also be more difficult to finance a property purchase aboard, said overseas property specialist Simon Conn.
“At the moment we’ve got no banks lending on buy-to-let in the Netherlands,” he said. “The more popular areas are in Portugal, Spain and Italy.
“Urban areas or cities are the best to go for if you want a permanent rental property and a steadier income – otherwise it’s very seasonal,” he said.