Expat buy to let investors losing out to the UK taxman

Published:  13 Oct at 6 PM
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New tax rules on buy-to-let landlords have resulted in the UK becoming one of Europe’s most expensive countries for property tax.

Due to mortgage and tax changes aimed at slowing house price inflation and levelling the British property market in favour of first-time buyers, expats investing in buy-to-let properties have been hard hit. A combination of the withdrawal of mortgage interest relief from high earners, increased rates of capital gains tax and higher stamp duty rates on purchases have made expats’ formerly effective property investment strategies lose their charm.

As a result, average yields for property investors renting out UK homes have fallen to just four per cent – the fifth lowest returns out of 25 countries. Sweden, Croatia, France and Austria have even lower rates of return, due mostly to their static, low rents and high real estate prices. In contrast, buy to let landlords in Eire are getting returns averaging 7.8 per cent on their investments.

Dublin is the second most expensive country for rentals, with the average for a one-bedroomed condo in the city now £1,000 a month, second only to Luxembourg at £1,166 monthly for a similar apartment. Yields of over six per cent are being enjoyed by landlords in the Netherlands, Slovakia, Portugal and Malta. It seems that, for expats who’ve invested in UK buy-to-let properties, the good times are well and truly over.

WorldFirst economist Edward Hardy believes the UK’s present tricky situation as regards Brexit is partly to blame. Long-term investment decisions, he says, are now increasingly difficult to justify, with the fall in returns perhaps marking the final days of one of the UK’s most successful investment sectors. He adds there is a clear correlation between wider economic health and a country’s housing sector, marking the deteriorating dynamics of Britain’s buy to let market as an alarm call for a residential housing downturn linked with a lack of economic wellbeing.
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