With yields on buy-to-let investments continuing to outpace many other asset classes, real estate remains alluring for investors seeking ongoing passive income and long-term capital growth. Increasingly the savviest of investors are casting their gaze abroad to dynamic property markets worldwide that offer higher rental returns plus significant upside potential.
From mature markets in Europe to emerging hot spots in Southeast Asia, certain global cities stand out for their prospects over the coming years for buy-to-let gains. Here, we’ll look at what a location needs in order to be a sound investment for buy-to-let, and some of the destinations you may want to consider as a landlord.
What makes a good buy-to-let location overseas?
When considering overseas buy-to-let investments, identifying markets with the right fundamentals is key to maximising returns. The ideal locations combine factors driving high tenant demand with conditions supporting property value growth over the longer term.
Destinations with expanding economies, business investment and diverse industries tend to see increasing jobs and population inflows. This leads to rising demand for rental accommodation across both residential and commercial rental property. Locations like Southeast Asia and emerging European cities, for example, are seeing tremendous economic development and are more in demand with professionals relocating for work.
Rapid urbanisation across the globe has seen cities grow dramatically, fuelling housing shortages. Areas where population growth outpaces property construction present major opportunities. Look for growth rates that indicate healthy demand without oversupply risks, with destinations that are growing at a stable but positive pace.
While many of the world’s top-tier cities offer strong tenant demand, extremely high buy-in prices limit returns for landlords and investors. Look for locations where median incomes can still afford rents and mortgages, as this will broaden the scope of potential tenants and minimise void periods in your property.
Modern infrastructure, public transit access, high-quality schools and amenities retain and attract tenants long-term, supporting higher rental prices and resulting in better income opportunities for investors. Areas with new transportation links also tend to undergo property booms.
Key destinations to consider
Once you’ve taken the above factors into consideration, you’ll be better equipped to narrow down your search of where in the world to invest in for the best return on investment. The following destinations are popular hubs that offer great returns and high demand.
Over the last decade, Spain has emerged as one of the top countries globally for buy-to-let investments, with several key factors making it especially attractive. Across Spain, high tourism numbers provide strong occupancy and rental demand in cities and resort areas year-round. Over 80 million visitors arrived in 2019 before the pandemic, drawn by Spain’s sunny weather, cuisine, history and culture. This flood of visitors and focus on tourism translates to an enormous market for holiday rentals.
Spain also presents a favourable tax environment for overseas property owners and has special residency programs to incentivise property investment in the country. For buy-to-let investors, rental income tax is only 19% and there is no inheritance tax. Additionally, Spain’s Golden Visa programme grants residency rights in return for a €500,000 property purchase.
While the major cities of Madrid and Barcelona continue to provide stable rental income, yields tend to be higher in Spain’s coastal resort destinations. For holiday lets, the Costa Blanca, Costa del Sol, Costa Brava and islands like Ibiza offer prime rental property locations.
Specifically, Marbella stands out as one of the most popular tourist spots, with an affluent international visitor base flocking to the area. Marbella property can generate strong short-term rental yields reaching 8-10% per year and there’s a broad range of property styles from classic Spanish homes to off-plan properties and new developments. Outside of beach areas, Spain’s floor prices make buying affordable relative to other European markets. This allows investors to get good value with solid upside potential as the country’s economy improves.
In recent years, Southeast Asia has emerged as a premier region for overseas property investment, with major property booms occurring across fast-growing cities. Yield-hungry investors are increasingly targeting Southeast Asian markets for buy-to-let opportunities.
Cities like Bangkok, Kuala Lumpur and Ho Chi Minh City are undergoing rapid development and urbanisation to match their surging populations. Malaysia alone has grown 68% in urban areas over the last 30 years, which has translated into tremendous demand for properties, with prices rising exponentially.
Beyond impressive capital gains, urban rental yields across the region remain uniformly high, averaging 4-8% annually. Technology and finance sector growth is also drawing steady streams of expat renters from multinational companies.
Southeast Asia’s tropical climate and unique culture additionally provide immense tourism potential, fuelling strong desire for hotels, resorts and short-term lets. Bali and Phuket rank amongst the top island destinations globally, while Bangkok logged over 22 million visitors in 2023 alone.
Governments are prioritising infrastructure improvements across these rapidly growing cities as well, expanding roads, public transport networks and international airports. This facilitates tourism and business travel, increasing the appeal of owning rental property in the region.
While restrictions on foreign buyers exist in some areas, they are being progressively relaxed to court overseas investors. Condominium units remain widely available for purchase and buy-to-let plays on urban apartment rentals. From offering value relative to other global cities, to exceptionally high yields and massive growth potential, Southeast Asia presents as the future global hotspot for overseas property investment over the next decade.
Over the last decade, Eastern European cities have become hotspots for real estate investment, with improving economic prospects and low property prices driving interest. Cities like Budapest, Prague and Warsaw now rank among the top locations for overseas buy-to-let.
Since joining the EU, countries across Eastern Europe have seen substantial economic growth and development. In tandem, their expanding technology and manufacturing sectors are creating jobs and wealth, fuelling rising tenant demand for urban rental properties. Popularity as a low-cost destination for tourism and conferences also continues to increase visitor numbers and hotel occupancy rates across the region.
Property prices across Eastern Europe remain affordable when compared to other European capitals, with rental yields reaching 6-8% in some places. Despite rising values, there is considerable room for long-term capital appreciation given the value gap with their Western counterparts. Eastern Europe also provides straightforward property ownership laws for foreign buyers compared to other emerging markets. Nations like Montenegro and Georgia now offer residency visas to investors in return for property purchases.
With low buy-in prices, high yields and massive upside potential for value gains, Eastern European cities like Budapest and Prague have become global hotspots for tourists, and buy-to-let investments in turn. And with economic growth and tourism outpacing Western Europe, strong demand drivers should continue fuelling returns across the region.
Portugal has become one of Europe’s most popular destinations for overseas property investment, driven by appealing lifestyle factors and a thriving tourism industry. Cities like Lisbon and Porto in particular offer fantastic buy-to-let potential. Lisbon and Porto have seen huge revitalisation over the last decade as Portugal’s economy rebounded after the European debt crisis. Both cities are now seeing some of the Eurozone’s highest GDP growth, unlocking major property price gains.
Tourism has simultaneously boomed, with annual visitor numbers to Portugal nearly doubling since 2010 to top 20 million. Lisbon and Porto are now firmly established as trending European hotspots, fuelling strong demand for short-term holiday rentals.
Portugal also runs a competitive Golden Visa programme providing residency rights in return for a €500,000 property purchase. This has attracted significant foreign investment into the Portugal market. For buy-to-let investors, average gross rental yields sit just over 5% for Portugal properties, catering to both long-term residents and short holiday lets. With property values still catching up to other Western capitals, substantial capital appreciation remains likely.
Offering a discounted buy-in relative to comparable Spanish destinations, outstanding lifestyle appeal and robust tourism growth, Portugal ranks among Europe’s top markets right now for overseas buy-to-let plays.
Germany has long been a pillar of stability in Europe, with steady economic growth and a reputation for reliability that appeals to overseas investors. Robust tenant demand combines with favourable demographics and property price appreciation to make Germany especially attractive now for buy-to-let.
Cities like Berlin, Munich, Hamburg and Frankfurt are benefitting from influxes of younger skilled workers drawn by expanding jobs in technology, finance, business services and manufacturing. Similarly, Germany’s centralised location also continues to draw companies opening European HQ offices.
This urban migration is fuelling pressure on Germany’s traditionally tight housing market while older homeowners are reluctant to sell across small towns. For buy-to-let investors this presents fantastic opportunity, with rental yields averaging 4-6% despite recent value gains. Germany also stands out through strong legal protections for landlords and relatively quick eviction processes if issues emerge. Overseas investors additionally have clear ownership rights and benefit from the secure financial system.
While German cities may lack the glamour of Paris or charm of Rome, the country wins through accessibility and affordability. Flights connect Germany easily internationally, while university towns provide fantastic research and student tenants. For landlords worried about how they’ll monitor their properties overseas, the countless connections and easy accessibility of Germany makes it a great option.
With a stable economy improbable to see crashes abroad, Germany appeals to buy-to-let investors planning long-duration holds. For balanced profiles between rental income, capital gains and security for money abroad, German cities present compelling opportunities right now relative to both Europe and many emerging markets.
While offering less dramatic returns than some developing markets, Japan continues to offer an attractive mix of income and security for foreign investors. After many years of declining or flat property appreciation, there are signs of increasing property values as well.
Rental yields in Japan are typically modest, but in the best markets, offer investors stable returns. For competitive prime units in Tokyo, an investor might expect 4-6% annually. Well-run properties beyond the most in-demand areas can provide higher returns, and professional investors in Japan target 10-12% gross rental yield from multi-unit buildings. Regional cities often offer higher ROI, and for investments in Fukuoka or property in Sapporo there have been recent gains in property values as well.
Foreign investors can expect competitive returns, and also a sense of security for their investments. Unlike some other Asian countries, there are no provisions against foreigners owning land in Japan. Japan has a stable political climate and legal system, allowing foreign investors to feel comfortable in the future security of their investments. Recent favorable changes in the value of the Japanese yen versus foreign currencies have provided even more incentive to invest in Japanese real estate.
Asian investors have shown especially strong interest. A familiar Asian culture and short travel times make Japan a friendly choice for business, travel, and other opportunities to review investment opportunities.
Managing buy-to-lets overseas
Investing in overseas property comes with many profitable perks, but it also poses logistical challenges. Here are a few tips for managing a property or a portfolio from overseas.
Find a reliable overseas property manager
Having an overseas property manager is essential when owning investment properties abroad. Vet managers thoroughly by reading reviews, talking to their current clients and ensuring they are responsive when you send messages or queries. A good manager will handle tenant screening and selection, maintenance issues, payments and more on your behalf.
Look into local laws and tax regulation
Make sure you understand rental laws, tax obligations, and regulations when owning properties overseas. Consult with an accountant and lawyer to ensure compliance and avoid legal issues. Stay up to date if laws change over time as they may affect your portfolio.
Offer multi-year lease discounts
Providing a small discount for longer 2-3 year leases can reduce turnover costs and vacancy periods in between tenants. This provides more stability as an overseas landlord unable to easily deal with transitions. Offering lease renewal incentives can have a similar benefit.
Provide clear guidance for maintenance budgets
Creating a guidance document for your property manager outlining standard maintenance costs you will approve without consultation can simplify things. Outline what service and repair thresholds they can authorise, giving them flexibility to resolve tenant issues quickly.
Utilise smartphone apps and smart home technology to monitor properties remotely, like sensors to prevent leaks or pipes bursting or smart locks to allow contactless tenant entry. Remote management systems centralise information and documentation like leases and repair requests to provide better oversight.
Achieving strong rental returns plus substantial long-term capital gains from global property markets continues to draw investors worldwide into overseas buy-to-let. While risks undoubtedly exist when purchasing abroad, targeting the right locations can lead to outstanding rewards.
However, proper due diligence remains critical before buying offshore. Factors like restrictions on foreign buyers, unreliable legal systems and lack of financing must be evaluated upfront. Hiring local estate agent contacts provides invaluable help navigating these hurdles in unfamiliar territory.
For those new to overseas property, reputable turnkey providers can also ease the buying process substantially while presenting inventory tailored specifically towards investment clients and expatriate buyers. These companies handle site viewings, negotiations, renovations and property management internationally.