Real estate investors are still heading in their droves to Europe, despite economic downturn and unrest. The benefits of a European property don’t seem to have decreased and this is all tied to the monetary policy of the European Central Bank. Investing in European property is still a savvy idea because of the way their system works. The European Central Bank has a recognisably loose monetary policy which sees interest rate kept artificially low and from September 2017 these rates were set at 0.00% for an extended period of time which wasn’t set by dates. This gave real estate investors the green light to continue investing in European property and benefiting from positive returns. Choosing to invest in Europe has the real potential to deliver great returns, but where do you start?
What should you know before buying European property?
Every country in Europe has its own guidelines and fiscal implications. Before making any investment is it important to research and be aware of:
• Any local taxation requirements
• Whether you need to pay capital gains tax
• What happens to your investment should you die
• Whether inheritance taxes are applicable
Many property investments do come with tax implications, so it is important you are aware of what is relevant to the country you choose to invest in. Taxes are on the increase across Europe, with the UK notable for its high taxation rates and relief measures for mortgages are decreasing in some countries such as the Netherlands.
Higher taxes are not putting investors off Europe, it is just important to be mindful of what you may need to pay. The exceptionally low cost of borrowing in Europe often offsets the additional taxation costs too.
Another thing to keep in mind when investing is the rights that tenants have, if you’re buying to let. In Continental Europe tenants rights are strict and tenants are very well protected, this is not the case in the UK where is it much easier to evict tenants.
What returns can European Real Estate offer?
There is no exact answer to this question. Experts suggest that in Europe’s core markets there will be returns but they’ll be on the lower side. Returns are unlikely to reach as high as 10 to 15% but lower percentage returns are common. Investors looking to Europe should be more interested in cash than capital gains. Recovering markets such as Greece and Spain may offer some hope of capital gains return but it is not as likely in stronger economies.
There is exceptionally high demand for European real estate which means there is always a way of making some cash or return on your investment, but it is important to realistic and not expect your European property to become a cash cow.
Where to Invest in Europe?
The is a tricky line to tread when choosing a location for your European property search. Strong economies like Germany will always be appealing but, as mentioned, recovering economies like Greece and Spain offer higher chance of capital gains. In main European capitals such as Paris and London, real estate investment is always high, but with the impact of Brexit, it is understandable some investors are looking to newer European states rather than choosing the UK.
The benefits of a European property are plentiful, investors just need to take their time over their choice of location and be aware of the relevant caveats such as taxation.