More and more British investors are turning to property, both at home and abroad. Around 15% of UK private investors have property in their portfolio, and demand continues to grow. When comparing the average annual capital growth of property to other asset classes such as equities, property often offers more stable, long-term returns. While securities are heavily influenced by market volatility, property is seen as a safe haven for wealth accumulation.
That’s why luxury real estate is almost always lucrative
In the UK, investments are spread across equities and real estate in particular, albeit with increasing volatility. The real estate market recorded a total investment volume of £34.3 billion in 2023, which is a decline compared to previous years. The office and retail sectors in particular are struggling, while residential and logistics real estate remain stable. UK Real Estate Investment Trusts (REITs) have recently led the way, achieving a return of 18.9% in the fourth quarter of 2023, demonstrating that property continues to outperform equities.
There are good reasons for this. Real estate offers investors not only value stability and diversification opportunities, but can also serve as protection against currency fluctuations and as a long-term capital investment. In addition, international investments contribute to economic development, promote real estate construction and stabilise markets. However, investors should consider local economic trends, regulatory differences and macroeconomic factors in order to minimise risks and make the most of opportunities.
These are the top property destinations
Mallorca has been a popular destination for British property investors for decades. It is estimated that around 15,000 Britons live on the island, and many more own holiday homes here. Its island status, mild Mediterranean climate and short flight times from the UK make a luxury real estate in Mallorca so sought-after. They not only offer a relaxing retreat, but also great potential for capital appreciation, especially in exclusive areas such as Port Andratx, Santa Ponsa and the hills of Son Vida.
British buyers particularly appreciate the southwest of Mallorca for its luxurious villas and proximity to the sea. Port Andratx is known for its marinas and offers a high proportion of premium properties with spectacular sea views. The capital, Palma, also attracts British investors because it offers both cosmopolitan flair and a stable infrastructure and cultural diversity. Other regions such as Deià and Pollensa in the north offer properties close to nature in the Sierra de Tramuntana and attract buyers who appreciate peace and privacy.
Investment opportunities in France and Italy
France and Italy are also among the preferred regions for British property investors. The Côte d’Azur offers stable value growth, particularly for luxury properties, which increases by an average of 5% per year. Many properties there offer sea views and exclusive locations that generate high rental income during the holiday season. Tuscany in Italy attracts buyers with its picturesque landscapes and offers country estates in particular, which are increasing in value due to the trend towards living close to nature.
Portugal – Algarve and Lisbon
The Algarve and Lisbon are among the most sought-after destinations for British investors. The Algarve offers coastal properties with good performance and high demand in the holiday segment. Lisbon is becoming increasingly interesting and is seeing stable growth in value due to its flourishing start-up scene and cosmopolitan character. Demand for real estate in Portugal is particularly strong due to the Golden Visa programme and tax advantages for foreign buyers.
Thailand – Phuket and Bangkok
Thailand offers British investors an attractive market due to comparatively low entry prices and high rental income. Bangkok and Phuket are popular destinations for holiday homes and offer good returns on investment. Tourism in Thailand in particular is driving demand for rental properties, and affordable prices make it a popular destination for overseas property investments.
Legal requirements for British investors
When buying property abroad, British investors should be aware of legal requirements, both in the UK and in the destination country. UK regulations require tax registration of foreign income from property rentals. Depending on the country, specific tax benefits and regulations apply that may affect returns. When purchasing, it is advisable to obtain comprehensive information about the tax framework and to avoid possible legal complications.
Complying with international regulations
In France, for example, foreign property buyers have to pay additional taxes, while Italy offers incentives for foreign investors. Under UK tax law, income from overseas property must be declared as part of the income tax return. Further information can be found in the UK Foreign Income Tax Act, which investors must observe.
