While there is no doubt that UK buy to let investors have been hammered by the government of late the situation seems to be very different in Ireland. A number of experts believe that Ireland will be the next buy to let hotspot and recent figures seem to support this view. So, what is pushing the Irish buy to let market and will it continue?
Irish buy to let rental yields
It is ironic that just 10 years ago the Irish economy was tanking, the government was forced to go cap in hand to the European Union and the financial sector was in meltdown. Today we have an economy which is prospering, at the centre of UK/EU Brexit talks and a potential benefactor of financial giants looking to relocate within the European Union. Who would have guessed this would be the situation 10 years ago?
Research by WorldFirst confirms the strength in the Irish buy to let market with yields improving from 6.54% in 2016 up to 7.08% in 2017. Over the same period rental yields in the UK buy to let market have fallen from 4.91% down to 4%. When you also consider that Irish GDP grew by 5.8% during the 12 month period ended June 2017, all seems to be rosy in the garden?
Irish house prices
As an extension of the strong buy to let market, Irish house prices are currently growing at the third fastest rate in the world today. The average rent for a one-bedroom apartment in one of Ireland’s major cities now stands at £12,000 placing the country in second place to Luxembourg where the average rent is £14,000 per annum. It is also worth noting that a variety of tax breaks have been reinstated for Irish buy to let investors at a time when the UK government is going in the opposite direction.
Is Brexit the fuel for this fire?
There are some very different opinions across the Irish property market in relation to Brexit and its perceived and actual impact. Sceptics suggest that the impact has been minimal in real terms although the press have on numerous occasions tried to talk up the number of financial giants looking to relocate to Ireland. Whether this has lit the fire for Ireland as a buy to let hotspot remains to be seen but there has been significant interest of late.
Whether Brexit supporters like it or not, there is no doubt that the UK will not be able to enjoy the full benefits of EU membership when Brexit negotiations have been completed. There may be trade agreements, there may be reciprocal tax arrangements but there will always be the potential for financial giants to leave London and relocate within the European Union. The long-term future and structure of the European Union is by no means certain, but at this moment in time Brexit is grabbing all of the headlines.
Hotspots can be dangerous
We can only hope that the Irish authorities learned from the previous property market collapse which saw Ireland on the verge of bankruptcy. That said, the bailout funds received from the European Union were actually repaid early and the economy is far stronger than many had predicted. So, there are certainly pros and cons to investing in the Irish buy to let market and hopefully history will not repeat itself.