While the Baltic States of Estonia, Latvia and Lithuania may be nabbing the headlines for their massive house price inflation, the Global Property Guide has calculated that the Slovak Republic is where investors should be looking.
Estonia may have experienced unprecedented price inflation (over 556 per cent between 1997 and 2006) but the cost of purchasing there is beginning to outweigh the potential investment benefits.
The same, says the report, can be said for property prices in Latvia and Lithuania which, while enjoying capital appreciation, are unable to keep pace in terms of gross rental yields.
The Global Property Guide has therefore declared Slovakia as the best bet for investors looking to plough their cash into property overseas.
Why? One reason is the country’s strong GDP performance, a factor closely associated with long-term property price rises.
Unfortunately, there are no house price statistics for Slovakia, but the Global Property Guide reckons it’s pretty safe to presume that prices are low.
Furthermore, they estimate that gross rental yields in Bratislava, the capital city, are very high at 10.1 per cent, a sure indicator to investors to strike while the iron is hot.
With the added bonus of low rental income tax and no capital gains tax on long-term property holdings, the advantages and future economic growth make it one of Europe’s most tempting investment propositions.
Other Contenders
The Global Property Guide also backs four other European countries for their investment potential, with Turkey being the next in line.
While prices in Istanbulare not regarded as cheap, the GDP growth, healthy market and prospect of no capital gains tax boost its attractiveness.
Sofia in Bulgaria also boasts some highly impressive gross rental yields at 10.6 per cent, although house price inflation is beginning to ease and transaction costs remain high.
The 8.17 per cent gross rental yields offered in Bucharest, Romania, a newly opened and growing market, should also attract investors.
In addition, an economy that’s on the rise, combined with low rental income tax, no capital gains tax and good GDP growth make it an attractive proposition.
The Global Property Guide tip Hungary as something of an outside bet, given its weak economic growth.
Nevertheless, with gross rental yields around 6.6 per cent to 8.3 per cent in the Capital centre and house prices that are still relatively low, the state of the market may depend on how committed the government remains to strengthening the economy.
