How This List Was Compiled
This list was compiled using the most up-to-date information available from Numbeo, Global Property Guide, and Eurostat’s Housing Price Statistics. Individual statistics vary slightly across sources, but general trends hold true. All screenshots are taken from Numbeo’s European Property Price Index 2016.
To create this list, we first needed to determine how we would rank the best properties. While we could have compared average property price per metre2, we decided to avoid this comparison because it ignores socioeconomic factors that matter to home buyers.
Instead, we ranked our selections on these three primary factors:
1. Price to Rent Ratio – the average cost of the home divided by average annual rental income. A lower ratio suggests that the property is a good investment for home owners, whereas a higher ratio suggests that you’d be better off renting instead of buying.
2. Price to Income Ratio – the ratio of median housing prices to family disposable income. This ratio is less relevant for prospective buyers looking for a holiday home, but it matters more if you intend to live in this second home for long periods of time or work in a foreign country. The lower this ratio the better.
3. Socioeconomic factors – some countries have housing markets that look great on paper, but when you adjust for inflation and factor in financial crises such as currency collapse, high interest rates, and recessions, you’ll realise that these deals really are too good to be true. Our list only features countries with strong housing markets that exhibit reasonable growth.
If you like this list and you would like to compare housing prices and/or the cost of living between international cities, we encourage you to visit our sources at the end of this article for further research.
Best Places to Buy Holiday Homes in Europe
Iceland boasts both gorgeous landscapes and a housing market that’s seen tremendous growth since 2013. House prices nationwide rose by an average of 3.18% in August 2016, according to Statistics Iceland, and the residential property price index rose by 9.48% between 2015 and August 2016. While residential property prices increased nationwide, urban centres like Reykjavik enjoyed the most growth.
Iceland currently has one of the best price to income ratios and price to rent ratios, which makes it an attractive location for both holiday seekers and buy-to-let homeowners. Islandsbanki forecasts 25% more growth in residential property prices between 2016 and 2017.
Things to consider:
Net rental income is taxed at a flat rate of 20%.
Buyers are responsible for agent fees, stamp duty, and registration fees.
Round trip transaction costs are cheap.
The Hague, Netherlands
If you’re keen to stay within the EU, the Dutch housing market is one of the most robust. Like most countries, the Dutch economy suffered during the 2008 global financial crisis, but since 2014 it’s made ample recovery. Property prices rose between 2% (detached homes) and 6.8% (apartments) in 2016.
Though buying prices are quite high in the Netherlands, you’ll quickly see a return on your investments thanks to its low price to income ratio and high gross rental yields. Plus, Rabobank predicts that Dutch housing prices will continue to rise 3.5–5.5% year over year.
Things to consider:
Expect high taxes at 30% of your assumed rental income.
Dutch policies are very pro-tenant (eviction is difficult).
English is spoken throughout the Netherlands.
Hungary’s housing market has enjoyed explosive growth over the past two years. In 2015, house prices on existing dwellings rose anywhere from 11.7 to a mind-boggling 17.7%, depending on the source.
Hungary’s gross rental yields are quite strong and housing prices are relatively low compared to most other high-growth countries. But be warned—Hungary’s housing price growth is expected to slow drastically over the next few years.
Things to consider:
Net rental income is relatively low, at a flat rate of 16%.
The VAT on new dwellings was decreased from 27% to 5%, effective from 2016–2019.
Property purchases in Hungary must be done through private contract with a lawyer. Non-residents must also have the approval of the Administrative Office and wait times might take 2–3 months.
Round trip transaction costs are relatively high.
Housing prices across Europe are subject to constant change and this list should not be taken as a definitive resource. Before you decide to buy your holiday home, make sure you research your desired country and strategise how to manage your home away from home.
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