Spanish property ranks well in Europe’s buy-to-let chart, study finds

Would-be landlords are being advised to look beyond the UK for better rental yields on their investment.

British investors seeking good returns on a buy-to-let investment have had their fingers burnt domestically with the recent hike in stamp duty on properties bought under such mortgages…

And now a new study by money transfer company WorldFirst has shown just how poor rental yields are on British properties when compared to most of Europe.

The study also found that Spain performs pretty well, ranking in the top half of nations when it comes to earning a steady income on rental property.

But first – the UK. According to the study, buy-to-let properties in Britain generate an average rental yield of 4.3%, placing the country 21^st out of the 29 countries featured in the ranking. Languishing at the bottom was Sweden, where strict rental controls in the housing market protect the tenant from any sudden rental hikes, and thus make investing in the market less attractive.

Generally, the Scandinavian and northern European ‘protectionist’ markets proved unattractive for rental returns, with the one anomaly being the Netherlands, which – at 6.57% average yield – is actually Europe’s most profitable buy-to-let market.

WorldFirst put this down to the relatively low property costs in the Netherlands, and the good balance between a property-owning portion of society and those who simply wish to rent. Other attractive markets were Belgium (yields of 6.47%) and Spain’s neighbour, Portugal (with yields of 6.29%).

Spain placed slap-bang in the middle of the ranking, placing 15^th with average rental yields of 4.96%. However, this was a national average, and many property experts would expect those rates to be far higher in the country’s stronger property markets, such as the Costa del Sol and Costa Blanca.

Spain’s rental markets in these regions have regularly returned rental yields of above 5% per year, while the affordability of the property prices – as well as the year-round demand for accommodation in what is Europe’s most visited country – makes Spain far more attractive than the numbers would initially suggest.

Indeed, public demand for accommodation, as well as ease in buying in foreign markets, should be taken into account when comparing average yields, 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 Spain, Portugal and Italy.”

Commenting on the study, WorldFirst market analyst Edward Hardy added: “With the recent changes to stamp duty on buy-to-let landlords, UK property investors looking to add to their portfolio might want to consider looking farther afield to get the best returns.”