The UK is now in the bottom five European buy-to-let markets for investors, according to international payment firm WorldFirst.
Meanwhile, Ireland is once again the top European location for buy-to-let investments average rental yield rose to 7.08% from 6.54% in 2016.
According to WorldFirst’s assessment, the UK’s rental market is beginning to hit buy-to-let investors with yields falling from from 4.91% to 4% over the past year. The latest findings also come a year after stamp duty changes came into play in the UK, significantly increasing fees for those investing in buy-to-let or purchasing a second home therefore making property investment even less of an attractive option.
For British investors, the falling pound has led to a significant increase in cost of purchasing a buy-to-let property with a one bedroom apartment in an Irish city costing over £12,000 more than it would have in 2016 and the same property in Luxembourg over £25,000 more expensive. Those who are lucky enough to have purchased a property prior to the recent fall though will see returns from rental income increase by up to 8% getting £900 more a year for a one bedroom apartment in an Irish city.
As Ireland’s economy continues its upward trajectory maintaining its spot as one of the fastest growing in the Eurozone, so too does its rental market. The average rent for a one bedroom apartment in an Irish city has soared to over £12,000 making it the second most expensive country to rent in the EU after Luxembourg which costs city renters over £14,000 per year. And whilst sale prices have seen an increase, these have remained closer to their European counterparts with the average cost of a one bedroom apartment in an Irish city costing over £168,000.
Malta, Portugal, Netherlands and Slovakia emerge as the next European hotspots with yields over 6%. All four countries have relatively low property prices yet rental averages provide an opportunity to earn a decent income.
Also at the bottom of the table are Sweden, Croatia, France and Austria all providing returns of less than 4% due to high property prices and a stagnant rents. Sweden takes last place for the third time due to its tightly controlled rental market.
| 2017 Rank | 2016 Rank | Country | Average Rental Yield |
| 1 | 1 (-) | Ireland | 7.08% |
| 2 | 8 (+6) | Malta | 6.64% |
| 3 | 3 (-) | Portugal | 6.43% |
| 4 | 2 (-2) | Netherlands | 6.27% |
| 5 | 9 (+4) | Slovakia | 6.12% |
| 6 | 4 (-2) | Belgium | 5.96% |
| 7 | 6 (-1) | Turkey | 5.91% |
| 8 | 7 (-1) | Bulgaria | 5.77% |
| 9 | 11 (+2) | Cyprus | 5.70% |
| 10 | 5 (-5) | Hungary | 5.59% |
| 11 | 10 (-1) | Latvia | 5.44% |
| 12 | 16 (+4) | Spain | 5.39% |
| 13 | 12 (-1) | Poland | 5.34% |
| 14 | 13 (-1) | Romania | 5.17% |
| 15 | 14 (-1) | Denmark | 5.08% |
| 16 | 22 (+6) | Slovenia | 4.59% |
| 17 | 18 (+1) | Estonia | 4.55% |
| 18 | 20 (+2) | Finland | 4.52% |
| 19 | 17 (-2) | Czech Republic | 4.47% |
| 20 | 19 (-1) | Greece | 4.40% |
| 21 | 21 (-) | Lithuania | 4.22% |
| 22 | 24 (+2) | Luxembourg | 4.21% |
| 23 | 28 (+5) | Italy | 4.08% |
| 24 | 23 (-1) | Germany | 4.03% |
| 25 | 15 (-10) | UK | 4.00% |
| 26 | 25 (-1) | Austria | 3.91% |
| 27 | 27 (-) | France | 3.82% |
| 28 | 26 (-2) | Croatia | 3.82% |
| 29 | 29 (-) | Sweden | 3.03% |
Edward Hardy, economist at WorldFirst, 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.
“While the UK remains in a purgatory-like state between EU membership and Brexit, long-term investment decisions have become increasingly difficult to make and falling returns for property investors could mark the beginning of the end for one of the UK’s most successful investment avenues of the past 25 years.”
