Holiday homes used to be about escaping the city. Buyers would seek out an old
stone property deep in the countryside and lie low for a couple of weeks at
a time, soaking up the sunshine. It was somewhere to unwind, away from the
hustle and bustle of urban life. Today, with the financial outlook getting
ever gloomier, buyers are looking for back-to-basics property investment -
and a budget mini-break - and seeking sanctuary in Europe’s cities.
The appeal of a city bolt hole is threefold: you can buy in a price bracket to
suit; the no-frills airlines are unlikely to axe flights to big cities; and
there has been a shift towards staying in homely flats, rather than soulless
hotel rooms, which has boosted the rental market.
“Our whole holiday pattern has changed to short, fun breaks and staying in
apartments where you can really get under the skin of a place,” says Charles
Weston-Baker, head of international sales at Savills, who has seen an
increase in demand for city-centre pieds-à-terre. “It’s all about people
doing it by themselves, managing, letting and booking on the internet.”
Investing in the eurozone may no longer offer the wealth of opportunity it
once did, but, says Mark O’Sullivan, head of trading for Currencies Direct,
“if you drive a hard bargain and can get distressed sellers to knock 25% off
the price, it’s like buying at 1.4 euros to the pound”.
You can still find bargains, too - a flat in town is far more affordable than
a farmhouse in the sticks - so, for those who fancy their own hideaway to
renovate and decorate, to disappear to for long weekends and rent out to
cover costs, here is our pick of the classic, coolest, chicest and most
cultural cities to consider.
Paris
Paris is pure pied-à-terre territory, partly because there is only so much
time you can spend in a 20-square-metre converted chambre de bonne, even if
it does have views of the Eiffel Tower, but mainly because few people would
turn down a bolt hole in this captivating city, which has the best
year-round rental returns of any European capital.
“Apartment-owners in Paris get an average of 96 booking inquiries a year,
which is more than enough to ensure they have guests all year round,” says
Kate Stinchcombe, of Holiday Lettings, an online rental agency. “There is
little seasonal fluctuation in rental rates, with an average one-bedroom
flat commanding between £500 and £570 a week in winter or summer.”
Lindsay Maxwell, a project manager from southeast London, lets her one-bedroom
flat in the 14th arrondissement, near the catacombs, for an average of £600
a week. Her only regret is that so many people want to rent it, she can’t
visit on a whim.
“I bought the flat as an indulgence and an investment,” says Maxwell, 54, who
spent £220,000 (plus 7% buying taxes and legal costs) in May last year and
has since opened up three small rooms to create one bright, large modern
space. “I sold a house in London and down-sized,” she says. “Now I’m living
out my fantasy in a city I love.”
Property prices have yet to drop significantly in Paris. Official notary
figures recorded a rise of 10% in the past year, while local agents report
falls of up to 10%, “so the reality is probably somewhere in the middle”,
says Mikael Postila, an associate in Knight Frank’s international research
team.
In the prime 5th, 6th and 7th arrondissements - “the Latin Quarter meets the
Eiffel Tower”, as Roderick Aris, a director of Winkworth France, puts it -
average prices are between £8,000 and £12,000 per square metre. “You’ll
struggle to pay less than £6,000 per square metre anywhere remotely central
and safe,” he adds. “The 10th arrondissement, around Canal Saint-Martin,
offers better value. We’re selling a two-bedroom 60-square-metre apartment
there, in need of total modernisation, for £385,000.” Call 020 8576 5582 or
visit www.winkworth.fr .
For rental returns, you can’t beat Montmartre. “It’s pure touristville, but
one client’s small studio flat was fully booked for rentals all year,” Aris
says. The £325,000 apartment earned £2,000 a month after fees - “An easy way
to more than cover the mortgage.”
Florence
You wouldn’t know it now from the elegant, light-filled result, which includes
restored frescoes and bathtubs at the end of the beds, but Susie Rogers
insists that her three-bedroom flat in a former convent in central Florence
was “disgusting”, when she bought it for about £630,000 in 2004. “It was in
an awful state, but I saw it and thought I’d do it up for fun, as I love
design,” she says of the property on which she went on to spend a further
£270,000.
“I use it for occasional weekends,” says Rogers, the owner of Body-WorksWest,
a west London gym. “I go to Florence to eat, shop and hide away in this
amazing flat.” She lets the property for £2,500 a week for 10 months a year,
but is now selling for £1.69m through Knight Frank (020 7629 8171, www.knightfrank.com
).
Although Tuscany has typically meant ramshackle farmhouses to its British
devotees, that has changed in the past two years. More buyers are seeking
low-maintenance city properties that cost an average of £5,000 per square
metre, says Rupert Fawcett, head of Knight Frank’s Italian desk. “Florence
is a delightful city. Renting is just a way to cover yourself when you’re
not there,” he adds.
Florence, surprisingly, isn’t a top performer for short-term lettings, with
one-bedroom flats fetching just £150 a week in low season and up to £600 a
week in summer. “Two-bedroom properties at the lower end are selling for
similar prices as one-bedders, but they can fetch £600 to £1,800 a week in
rental income,” says Kate Stinchcombe, of Holiday Lettings.
With a wealth of art and architecture at its core, the city offers buyers the
chance to live in a unique conversion. There is a mix of shabby and
sophisticated on offer. The 15th-century Palazzo Bardi, where remaining
flats start at £1.15m through Knight Frank, is one fresco-filled example.
For those who want art on their doorstep, but not on their ceilings, the
same agent is selling a one-bedroom apartment in a converted palazzo just
steps from the Uffizi gallery for £330,000.
Barcelona
The Spanish city’s permanently packed streets and cava bars show little sign
of the slowdown. There’s even a dramatic new Dubai-style landmark, the
sail-shaped Hotel Vela, emerging on its coast-line. The property market,
however, has taken a turn, with average sale prices down by 10% this year.
“Everything was flying off the shelves two years ago,” says Alex Vaughan,
director of Lucas Fox estate agency (00 34 933 562989, www.lucasfox.com
). “Now you can buy things considerably cheaper if you get to know the
market a bit. There are opportunities all over the city.”
Well-located properties with terraces often change hands without coming onto
the open market, but for the rest, sellers are accepting offers of up to 20%
below asking price.
During the boom, buyers were branching out into edgier districts such as El
Raval, on the “wrong” side of the Ramblas, to find better value for money,
but the downturn in the market makes this the time to revisit the Alist
areas, says Rita Fryer of The Property Finders, a buying agency. “This is a
tremendous opportunity to buy in the best areas at bargain rates. And there
hasn’t been any downturn in demand for short-let flats this year. Just make
sure the property has a tourist licence, as the council is not issuing any
new ones.”
Spanish buying costs are high - 10%-12% of the property’s value - but rental
income in central Barcelona can be similarly high, as there is year-round
demand for short-term accommodation and a severe lack of hotel rooms. The
Born district, near the Ramblas, is where most tourists want to stay.
One-bed flats there rent from about £90 a night. “Most owners renting out
their properties work on the basis of 70% occupancy, which brings in an 8%
yield,” Vaughan says.
Prague
Long before it joined the European Union in 2004, the Czech Republic paved the
way for the property-market boom in former Communist countries. “Prague is
eastern Europe’s only real blue-chip location, on a par with Paris or
Amsterdam,” says Eva Kavkova, director of Property in Prague (00 420 603
971931, www.propertyinprague.com
). “You only need to see it once and you fall in love.
“Investors still consider it a growth market with minimum risk,” she adds.
“Even with our strong price growth, which was 17% last year, property prices
are still only 38% of the EU average.” Previously, foreigners were able to
buy property only through a limited company, so Tallinn and Budapest stole
some of the country’s thunder as an investment destination. Now, Britons
need an EU card (which costs £700-£800), and from next May, even that will
no longer be necessary.
Old-town Prague is where bolt-hole buyers and short-letters want to be, with
average prices of £3,500 per square metre. A two-bedroom flat in the centre
of the new town would cost about £270,000 and let from £120 a night. “The
city’s population triples in summer with all the tourists, but the market
for rentals never slows at any time of the year,” Kavkova says.
For those who want a slice of classic Bohemia, a surprising number of old
buildings in central Prague still need renovating. Simon Tweddle, who runs
thePrague-based agency Property Investment International (07917 830084, www.
propertyinvestmentinternational.com ), says: “It’s a lot pricier to buy
here now than a year ago, but buying costs are low. There’s no direct tax or
stamp duty, notary fees are small and, after five years, you pay no
capital-gains tax.”
Berlin
Berlin is an anomaly among European capitals: it’s trendy and friendly, with
great architecture, yet property prices are about 10% of their Paris or
London equivalents. “Germany is a gold mine, and Berlin in particular, but
few people realise the scale of the opportunities,” says Mike Smith of
Berlin Buy2Let, (01273 305550, www.berlinbuy2let.com
), which sells mainly to investors seeking long-term tenants. “Even the
Berliners don’t see the value of their city.”
Buyers wanting weekend pads are emerging, with one-bedroom flats letting to
tourists for about £300 a week. “Areas of the former east, such as
Friedrichshain and Prenzlauer Berg, are going crazy at the moment,” Smith
says. “People who know the city better tend to want western areas such as
Charlottenburg, where you can buy a one-bedroom, 60-square-metre flat in a
classic block for £60,000.”
Buying costs are high in Germany, however, with taxes and fees adding up to
8%-10% of the property’s value, and it’s hard for foreign buyers to get more
than a 50%-60% mortgage from banks.
Matthew Littlecott, 38, and his wife, Anna, 34, from Grantham, in
Lincolnshire, bought a one-bedroom flat in the Kreuzberg area for £25,000
two years ago. “It’s a great place to live, with excellent arts, culture and
nightlife,” says Littlecott, who now runs ProVenture Property (01476 568060, www.proventureproperty.com
). “We intended to use the flat ourselves, but it has always had tenants, so
we’re now looking to buy a block that we can renovate and rent out, keeping
one flat for ourselves.”
NEXT WEEK: We look at up-and-coming destinations, including Dubrovnik,
Istanbul and Lisbon
