Here are the best places in Europe to buy a second home, from luxury city homes to vacation rentals

Europe has a lot of great places to buy a second home, whether you’re looking for a vacation home now that it’s safe to travel again or a place to put your money while the stock market is going crazy.

 

The continent has something for everyone, from good food and rich culture to beautiful scenery, and people are buying homes there.

 

According to new research from the international real estate agency Knight Frank, the prime real estate market in Europe has grown by 5.6% in the past year as demand has stayed high. Meanwhile, rental income in the area’s most popular vacation spots keeps going up.

 

Kate Everett-Allen, head of international residential research at Knight Frank, said, “Europe’s cities offer culture, connectivity, and a good quality of life for second homeowners, and strong tenant occupancy and relatively low purchase costs for investors.”

 

As inflation rises, investors are looking for safe investments and investments that will bring in money. This interest is coming from both sides of the Atlantic.

 

Still, buying a house is a big investment, just like any other kind of investment, and it can be hard to know where to start.

Top cities for rising home prices

 

If you want your money to grow, you might want to look at the cities of Western Europe, which are always interesting. Knight Frank says that Europe’s prime real estate markets, which are the top 5% of the market in terms of value, have had some of the highest price growth in the world over the past year.

 

In the year leading up to June 2022, high-end properties in Berlin, Germany, grew in value by an average of 12.6%, making it the city with the most price growth.

 

The annual increase puts Berlin’s rate of growth far ahead of that of other major cities like New York (7.3%), Hong Kong (3.1%), and London  (2.5 %).

 

In other places, high-end real estate markets like Edinburgh (11.2%), Dublin (10.2%), Zurich (10.2%), and Paris (10.2%) have seen strong price growth this year (8.9 percent ). The top cities in the region are still growing, even though growth rates on the global property market are slowing down because interest rates are going up and the economy is getting worse. But Knight Frank said that the slowdown hasn’t yet affected property prices, and that the luxury market has been especially strong.

 

“Rising mortgage rates and a weakening global economic outlook are putting a damper on some of the excitement of the last two years,” the report said. “However, the slowdown will be felt most in lower price brackets and domestic markets.”

 

Buying property in another country isn’t always easy, though. Before making an overseas purchase, buyers should think about foreign exchange rates, local mortgages and taxes, ownership and sales costs, and any restrictions on foreign owners.

 

Best places to get money back on a rental

 

If you want to buy a property to rent out, Europe’s best vacation spots might be a good choice. The Mediterranean coast is always a hit with tourists.

 

On top of the above, there are a few other things to think about when buying a vacation home to rent out. These include location, both in terms of how close it is to local amenities and how easy it is to get to international airports, year-round demand to keep vacancies to a minimum, and the liquidity of the market.

 

Knight Frank says that Tuscany and Liguria in Italy, the south coast and French Alps in France, and Barcelona, Marbella, and the Balearic Islands in Spain are some of the best places in Europe to buy a property to rent out.

 

In 2021, there was a 30 percent increase in property searches in Tuscany alone, which made up two-thirds of all property searches in Italy. The city of Lucca on the Serchio River in Tuscany is a popular choice. Along with Pisa and Bolgheri, it will make up a quarter of buyer requests in 2021, and its prices will rise by 6% each year, according to Knight Frank.

 

The average price of a home that Knight Frank buyers are looking for in Lucca and Pisa is now around 1.7 million euros ($1.8 million). This is much less than the average price of 3.7 million euros in the Tuscany region. On average, it costs 471 euros per day to rent a place.

 

Competition among buyers heats up

 

Europe’s real estate market is heating up because the dollar is getting stronger and the euro is getting weaker. As a result, Europe is becoming a more appealing place for U.S. tourists and real estate investors.

 

The euro is close to being worth the same as the dollar right now. This means that U.S. buyers can save 15–20 percent on property prices in any of the 19 countries that are part of the euro zone compared to July 2021.

 

And it’s clear.

Knight Frank found that the number of searches by U.S. buyers for French properties went up by 37% in the first five months of 2022. Now, they are looking for people all over the continent.

 

Mark Harvey, the head of international at Knight Frank, said, “In the past, U.S. interest has been focused on cities that offer culture and connections, like Rome, Paris, Barcelona, and Florence.”

 

“But U.S. buyers are now looking at traditional sunbelt areas, which is a change from the norm,” he said, pointing out that Mallorca, Sardinia, and the South of France are becoming more popular.

 

Since the U.S. Federal Reserve is tightening monetary policy faster than the European Central Bank, this dollar rally could last for a while, making Europe a good place to invest for a long time.

 

“If the Federal Reserve raises rates again, the dollar will get stronger against the euro, which could mean that U.S. buyers can get better deals,” Everett-Allen said.