In some respects it is a good idea to diversify investments so that you are not overly reliant on one source of wealth creation. A sudden change in fortunes of one asset class, or geography, can have a disproportionate effect on your investments.
On the other hand it makes sense not to diversify to such an extent that you are constantly going up a learning curve (unless this is your thing) and having to run, to continually monitor your investments or keep up to speed with legislative changes.
On the whole, property investing has all been about capital growth or yield. Or future growth versus cashflow. However there are a myriad of variables at play.
Net European Union contributor?
Take Poland as an example, as a net recipient of EU funds, it is receiving investment into its infrastructure which in turn attracts multi-national companies to establish a footprint there, or locate main offices there. This in turn attracts workers who need somewhere to rent or buy as an investment. So as an investor it might be attractive to invest in a country which is receiving a strong inflow of investment funds, which will boost the country’s infrastructure, productivity and make it more attractive for businesses to locate there.
Tenant – landlord buy-to-let rules
In places like Berlin there are rental caps in certain areas, in order to ensure stability of rental prices and to ‘prevent’ prices over-escalating. This can, on the face of it, put some investors off buying there, however, there are ways around this, for example buying a new property or a renovation, where there is more flexibility on setting rental prices.
Or other ways of investing in property, like fixed term, fixed return investments, can be another way of helping an investor avoid having to worry about local regulations or legislative changes.
Buy to let in Poland
Investing in Polish cities like Krakow or Warsaw, means a landlord is investing in a lighter-touch regulatory environment, with far less regulation than a buy-to-let market such as the United Kingdom. So whilst there are safety regulations like conducting a gas safety check on boilers and gas-powered ovens, there is not the same legal requirement to install carbon monoxide alarms, smoke detectors, carry out Legionnaire’s tests, conduct Right-to-Rent checks, all of which increase the costs for being a landlord in the UK. Nor are there indeed the 3% stamp duty surcharges, which affect second home buyers in the UK.
Individual property investor taxation
As an investor you might also have your eye on the taxation backdrop and check whether you are plumping for a lean, or high-taxing country. Generally France is a high taxation state. I know of individuals who have moved to the UK to run a business offering French products and services because the taxation and red tape are just too high. In addition to taxes there are social charge levies too. There are ways around this and methods to setting up a property investment very tax-efficiently, but it is all a question of having the know-how.
Ease of access to investor finance
This can be cyclical. Ten years ago it was far easier to get finance in the UK or Spain than it was in Poland for example. Now with all the extra layers of regulation which have descended on the Mortgage market, it is now as challenging to get a mortgage in the UK as in Poland or Germany, in many instances. France may be one of the easiest to get a mortgage currently.
If you want advice and help on where to invest in Europe, which might be right for you then please get in touch.
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Tags: Buy to let, European property, Germany, investment property, Poland