Most Affordable Countries to Invest In Luxury Second Homes

Image courtesy of Bartosz Domiczek

Since the global pandemic, there's been a noticeable uptick in the demand for luxury second homes, a trend fueled by changing lifestyles and the flexibility of remote work. But with luxury comes the inevitable question of cost. How does one strike a balance between indulgence and investment? To shed light on this, we embarked on a comprehensive study, aiming to identify the most affordable countries to invest in a luxury waterfront second home for UK investors out of the most yearned-for destinations.

Our approach was twofold: firstly, we selected countries based on their popularity, as indicated by Google search volumes. This ensured that our list was not only data-driven but also aligned with current market interests. Secondly, we delved deep into various affordability metrics, from property prices to fine dining costs, to paint a holistic picture of value for money in the luxury segment.

For the purposes of our study, we’ve defined “luxury property” to be a 3-bed waterfront property listed on a luxury property website. Waterfront can be defined as properties overlooking the sea, a lake or a river.

As you journey through this article, you'll discover surprising frontrunners, understand the metrics that matter, and gain insights that could shape your next investment decision. Whether you're a seasoned real estate investor, developer or someone daydreaming about a luxurious overseas abode, this study promises to help guide your next luxury investment decision. Let's dive in.

Spoiler alert: Ireland is the winner (scroll down to see why)!

Surging Demand in Luxury Second Homes

Following a period of global uncertainty, the allure of luxury second homes has seen a remarkable resurgence. But what's driving this renewed interest? For many, the pandemic reshaped priorities, emphasising the value of comfort, space, and a change of scenery. With more people now having the flexibility to work remotely, the dream of waking up in a luxurious setting, away from the hustle and bustle, has become an attainable reality for many.

Reasons for the rise in demand:

• Pandemic Effect: People are spending more time indoors and desire more space, natural light, and fresh air. A second home offers an escape from city life.

• Remote Work: With many working remotely, living close to the workplace is no longer a necessity.

• Luxury Factor: The demand is specifically for luxury homes with amenities like outdoor spaces, swimming pools, and scenic views.

• Investment Opportunity: Luxury homes are seen as long-term investments, and with low-interest rates, real estate offers good returns.

• Location: Properties near natural attractions like national parks, mountain ranges, and beaches are popular. Areas with good quality of life are also in demand.
  
  

The Metrics & How We Ranked Affordability

For this study it was essential to understand what makes one destination more affordable than another. Therefore our research didn't just rely on gut feelings; we used solid data to determine an “affordability score” for each country. Here's a breakdown of the metrics we considered:

Average Property Prices: We researched the prices of the cheapest 25% of luxury waterfront 3-bedroom properties listed on sites such as Sotheby’s and James Edition. This gives a direct insight into the upfront investment required for the most affordable properties.

Price Per Square Foot: This metric offers a perspective on the value you get for the space. It's a great way to compare properties of different sizes.

Airbnb Revenue: By considering potential earnings from renting out the property during summer's peak months, we gauged the potential return on investment.

Flight Prices from the UK: Accessibility can influence a property's appeal. We factored in the average flight costs in August from the UK to each destination.

Dining Costs: The price of a tasting menu at top-rated fine dining restaurants was used as a proxy for the general luxury living costs in each location.

Luxury Car Hire Rates: The average daily price for hiring premium cars, such as a Mercedes C-class, was taken into account. This reflects the transportation costs for those who prefer to travel in style.

Property Taxes: No one likes unexpected costs. We ranked countries based on their property tax regimes, with higher scores indicating lower taxes.

Weighting System: Understanding that not all metrics hold equal importance for investors, we assigned a weighting system. Property prices were deemed thrice as significant as the other metrics, given their direct impact on the initial investment amount.

With these metrics in hand, we aimed to provide a holistic view of affordability by creating an affordability score in order to rank all the countries by affordability. This ensured that potential investors have all the information they need to make informed decisions.

Full Table of Rankings

Below is a comprehensive breakdown of our findings, presenting each country's affordability scores alongside the various metrics:

Countries	Affordability Score	Price of Properties	Price/Sqft	Airbnb Revenue	Ticket Price	Tasting Menu Price	Car Hire Price	Property Tax Score
Ireland	10.0	£453,808	£254	£320	£68	£174	£133	4
Cyprus	9.3	£507,636	£288	£385	£268	£80	£126	5
Mauritius	8.9	£539,299	£318	£280	£1,234	£63	£102	5
South Africa	8.7	£551,501	£244	£228	£1,530	£104	£62	4
Croatia	8.7	£555,896	£380	£536	£176	£133	£90	4
Greece	8.6	£488,416	£300	£665	£251	£174	£221	3
Portugal	8.5	£499,547	£304	£381	£159	£178	£110	3
Turkey	8.5	£487,341	£273	£383	£407	£103	£167	3
Malta	8.4	£553,038	£353	£305	£127	£103	£72	2
UAE	8.4	£613,150	£344	£769	£428	£220	£124	5
Canada	8.2	£520,795	£311	£389	£843	£54	£413	3
Montenegro	8.1	£635,622	£452	£373	£181	£183	£62	4
Spain	8.1	£521,433	£375	£339	£134	£122	£179	3
Sweden	8.1	£627,082	£292	£273	£143	£57	£268	3
Italy	7.8	£536,633	£312	£470	£194	£121	£209	2
New Zealand	7.4	£623,119	£411	£393	£1,172	£91	£104	3
Netherlands	6.7	£940,615	£523	£322	£133	£78	£194	4
France	6.6	£651,261	£557	£382	£85	£194	£239	1
Switzerland	6.5	£1,283,831	£817	£490	£83	£52	£121	2
Austria	6.4	£896,456	£780	£613	£160	£121	£57	3

(On mobile, scroll to the right to see the whole table —>)

The Top Contenders: A Deep Dive

In the realm of luxury second homes, some countries have emerged as more affordable and appealing than others. Let's delve into the top contenders and understand what sets them apart.

Ireland: The Unexpected Leader

Key Metrics and Real Estate Landscape: Emerging as the most affordable luxury destination, Ireland's property market, especially in waterfront areas, offers standout value. The average price for a luxury waterfront 3-bedroom property is £453,808, a figure that, when combined with an affordability score of 10/10, highlights Ireland's exceptional value proposition in the luxury segment. Beyond just property prices, the country boasts a rich mix of both modern luxury homes and historic estates, catering to a wide range of buyer tastes. The relatively modest costs for dining, car hire, and property taxes further solidify Ireland's position as the top value-for-money luxury destination.

Cultural and Natural Allure: Ireland offers a unique blend of culture, history, and natural beauty. From the bustling streets of Dublin, filled with historic landmarks and vibrant nightlife, to the serene landscapes of the Wild Atlantic Way, there's something for everyone. The country's deep-rooted traditions, friendly locals, and world-renowned festivals like St. Patrick's Day add to its charm.

Economic Stability and Growth: Ireland's robust economy, driven by sectors like technology, pharmaceuticals, and finance, ensures stability for real estate investments. The country's pro-business policies and its position as a gateway to Europe make it a hotspot for international investors.

Climate and Accessibility: While Ireland might not boast the sunniest of climates, its temperate weather has its own appeal. Mild summers with an average temperature of 16°C in August, though accompanied by 80mm of rainfall, offer a refreshing change from the scorching heat in many parts of the world. Plus, being just an hour's flight away from the UK, it's easily accessible for weekend getaways or longer stays.

Bayview House in Arthurstown County Wexford, Ireland on sale for £694,643 (source: Linsey Sotheby’s)

Cyprus & Mauritius: Close on Ireland's Heels

Cyprus: Nestled in the heart of the Mediterranean, Cyprus shines with an impressive affordability score of 9.3. With luxury waterfront properties averaging at £507,636, it's a haven for those seeking a blend of culture and coastal charm. Its impeccable property tax score of 5 further sweetens the deal. Potential investors can also anticipate a promising Airbnb revenue of £385 during the peak months. And for those looking to explore the island in style, luxury car rentals are available at a reasonable £126 per day.

Villa In Paphos, Cyprus For Sale For £514,091 (source: Grekodom Development)

Mauritius: With an affordability score of 8.9, Mauritius stands out. The average property price is slightly higher at £539,299, but the low property tax and reasonable luxury amenities costs balance it out. Dining at top-rated restaurants averages a modest £63, promising luxury without extravagance. The only downside is that the island’s temperature is 19°C in August, but during the UK’s winter months it boasts highs of 34°C, making it the perfect winter sun destination.

Luxury Apartment With Sea Views For Sale In Tamarin, Mauritius for £410,030 (source: JamesEdition)

South Africa: With an affordability score of 8.7, South Africa offers luxury homes averaging £551,501. Though UK flights are pricey at £1,530, it boasts affordable gourmet dining at £104 and luxury car rentals at just £62 per day. Despite higher flight costs, attractions like Table Mountain make it a tempting destination.

Oceanfront residence on the famous Whale Coast, South Africa For £700,687 (source: JamesEdition)

Other Noteworthy Contenders:

Croatia: With its stunning Adriatic coastline and an affordability score that rivals many, Croatia offers luxury waterfront properties in a Mediterranean paradise.

Beautiful House With Sea Views For Sale In Istria County, Croatia For £694,643 (source: JamesEdition)

Greece: Known for its rich history and beautiful islands, Greece boasts an affordability score of 8.6 and a tempting average nightly Airbnb revenue of £665.

Stunning Villa With Breathtaking Views In Kefalonia, Greece For £503,616 (source: Vinieris)

Portugal & Turkey: Both countries shine with affordability scores of 8.5, with Portugal's captivating coastal regions and Turkey's blend of European and Asian cultures adding unique appeal for luxury investors.

Luxury villa with an exceptional backdrop In Portugal For £432,009 (source: Espacus Prestige)

Each of these countries has its own unique offerings, but they all provide excellent value for potential luxury second home investors. Whether it's the culture, climate, or cost-effectiveness, there's something for everyone in these top-ranking destinations.

Top Country by Metric: A Closer Look

While the overall affordability score provides a comprehensive view, it's also insightful to delve into individual metrics to see which countries shine in specific areas. Here's a breakdown:

Lowest Property Prices: Ireland stands out here, offering luxury waterfront homes at an average price of £453,808. This positions Ireland as a prime destination for those seeking waterfront luxury without the exorbitant price tag.

Best Price Per Square Foot: South Africa offers a competitive rate of only £244 per square foot, ensuring buyers get ample space without stretching their budget. This metric is crucial for those prioritising spacious luxury homes.

Highest Airbnb Revenue: The United Arab Emirates takes the lead with an average nightly revenue of £769 during the summer months. For investors eyeing potential rental income, the UAE promises lucrative returns.

Lowest Flight Prices from the UK: Ireland is the most budget-friendly destination to fly to from the UK in August, with an average ticket price of just £68. This makes spontaneous weekend getaways or regular visits more feasible.

Cheapest Dining at Top-Rated Restaurants: Montenegro offers an exquisite dining experience without a hefty bill. With an average tasting menu price of £62 at top-rated restaurants, it's a food lover's paradise.

Lowest Premium Car Hire Rates: Switzerland wins in this category, allowing you to drive in style for just £52 per day. It's an added perk for those who love exploring their surroundings in luxury vehicles.

Best Property Tax Scores: Both Mauritius and the United Arab Emirates score a perfect 5, indicating very low property taxes. The UAE is particularly favourable offering 0% on rental income and property taxes. This is a boon for long-term investors, ensuring they retain a larger portion of their investment returns.

Beyond Affordability: Climate and Accessibility

While the financial metrics provide a clear picture of affordability, there's more to choosing a second home than just cost. Two significant factors that can sway a decision are the climate of the destination and its accessibility, especially from major hubs like the UK.

Climate: The allure of a second home often lies in its promise of a comfortable climate, especially during holiday months. For instance, while Ireland emerged as the most affordable, it offers a cooler August climate with an average temperature of 16°C and a higher rainfall of 80mm. On the other hand, countries like South Africa and Cyprus promise almost rain-free Augusts with temperatures soaring to 33°C and 29°C, respectively. Such variations can be pivotal for buyers whose primary motivation is a sunny summer retreat or a winter haven.

Accessibility: The ease of reaching the second home, especially for those based in the UK, can significantly influence the decision. A closer look at the data reveals that many countries are within a few hours of flight from the UK. Ireland, Netherlands, Switzerland, and France, for instance, are all within 2 hours, making them convenient for quick getaways or regular visits. On the other end of the spectrum, destinations like Mauritius and South Africa, while offering unique landscapes and experiences, require longer flights of around 12 hours.

Surprises and Noteworthy Mentions

Every study brings with it a few surprises, and our exploration of luxury second homes was no exception. Let's delve into some unexpected entries and see how traditional luxury hotspots fared.

Unexpected Entries:

United Arab Emirates: Many might raise an eyebrow seeing the UAE, known for its opulence and high-end living, on an affordability list. With an average luxury waterfront 3-bedroom property price of £613,150, it's certainly not the cheapest. However, its perfect property tax score of 5 and potential Airbnb revenues make it an attractive proposition for long-term investors. The scorching 38°C in August might be a deterrent for some, but for those seeking year-round sunshine, it's a haven.

Canada: Known for its vast landscapes, metropolitan cities, and high standard of living, Canada's 11th place for affordability might surprise many. With an average property price of £520,795 and a relatively high potential Airbnb revenue of £389 during peak months, it offers a balance between luxury and potential returns. However, the higher flight prices from the UK (£843) might be a factor to consider for frequent travellers.

Spain: A favourite for many seeking sun, sea, and culture, Spain's 13th position is a surprise. With its rich history, beautiful coastlines, and culinary delights, Spain offers luxury waterfront properties at an average price of £521,433. The potential Airbnb revenue stands at £339 during peak months, making it an attractive investment for those eyeing rental returns. Yet, many would expect Spain to rank higher in terms of affordability for luxury second homes.

Traditional Luxury Destinations:

France: Known for its riviera charm and Parisian luxury, France is a staple in the luxury real estate market. However, with an average property price of £651,261 and an affordability score of 6.6, it finds itself lower on the list. The relatively higher costs associated with luxury amenities coupled with property prices and high property tax have impacted its ranking, despite its moderate 24°C in August and proximity to the UK.

Italy: Another European gem, Italy, with its rich history and scenic landscapes, is a favourite for many luxury home seekers. Yet, with an average property price of £536,633 and an affordability score of 7.8, it doesn't top the list. The costs, combined with a moderate 20°C in August, place it in the mid-range of our rankings.

Switzerland: Renowned for its alpine beauty and luxury ski resorts, Switzerland is a traditional luxury destination. However, its high average property price of £1,283,831 positions it lower in terms of affordability, even though it offers a cool escape with 23°C in August.

The Broader Picture: What Google Searches Tell Us

The digital age has transformed how we make decisions, and real estate is no exception. Our study's foundation was built upon the curiosity of the masses, as reflected in Google search volumes. Here's what we found:

• France leads the pack with a monthly search volume of 1,340 from the UK for Google searches related to "second homes" and “holiday homes”.

• Ireland follows closely with 1,030 searches, showcasing its rising popularity among potential buyers.

• Spain, a traditional favourite, still holds strong interest with 610 searches.

• Other notable mentions include Portugal (430 searches), Italy (410 searches), and Turkey (240 searches).

On the other end of the spectrum, many countries, from Mexico to Zimbabwe, registered zero searches, indicating a lack of interest or awareness among UK searchers for second homes in these destinations which is why they didn’t feature in the affordability ranking.

Key Takeaways for Luxury Real Estate Investors & Developers

For Investors:

Affordability Meets Luxury: Luxury doesn't always mean unaffordable. Our study showcases that destinations like Ireland, Cyprus, and Mauritius, offer the best of both worlds. It's possible to find luxury without breaking the bank.

Diverse Opportunities: From the Mediterranean's allure to the unexpected charm of newer markets, there's a wide range of options to explore based on individual preferences, be it climate, accessibility, or potential rental income.

Informed Decisions: Beyond just property prices, factors like potential Airbnb revenues, luxury amenity costs, and property taxes play a crucial role in determining the overall value of an investment. Always consider the broader picture.

For Developers:

Emerging Markets: Countries like Ireland and Mauritius are showing strong potential for luxury real estate development, given their rising popularity and affordability scores. These markets present fresh opportunities for innovative projects.

Digital Influence: The power of online search trends cannot be ignored. While countries like France and Spain are popular in online searches, their lower affordability scores suggest a potential gap in the market. This could be an opportunity for developers to introduce more value-driven luxury projects.

Holistic Development: It's not just about building luxury properties. Consider the entire ecosystem – from local amenities to accessibility. A well-rounded development approach can significantly enhance the appeal of a project.

Viglostasi Residence, Greece & image courtesy of Block722

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Media Relations, Sources & Methodology

Media Resources

For journalists and media professionals, we've compiled a set of high-resolution images, infographics, and key findings related to this study:

• Link to web-ready images of properties.

• Link to infographics.

Search Data

Data sourced from Google, focusing on UK searches related to second homes and holiday homes globally.

• Top 20 countries with the most online demand were selected for the affordability study, providing that a statistically significant amount of property data was available (see below)

• Google search data link.

Property Data

Property Prices: Extracted from James Edition's real estate listings as of October 2023. This platform aggregates global listings from luxury real estate websites like Sotheby’s. Only 3-bedroom waterfront properties were analysed.

• Property price data link.

• Real Estate Taxes: Researched various taxes, including Income Tax on Rent, Buying Costs, Selling Costs, Corporate Tax, and Property Taxes. A property tax score was derived, ranking countries in quintiles based on tax favorability. A score of 5 indicates very low tax.

• Websites used for tax information include: Global Property Guide, Experts for Expats, Tax Foundation, and others.

Airbnb Revenue: Average nightly prices were sourced from Airbnb for each country, filtering for 3-bedroom waterfront properties for stays in June-August 2024.

Travel & Lifestyle Data

Flight Prices: Averaged from Skyscanner for UK flights to each country for August 2024.

• Fine Dining Restaurant Prices: Averaged from tasting menus of top Michelin-star restaurants or top-rated fine dining establishments in each country.

• Car Rental Prices: Average daily rates for week-long rentals of premium cars (e.g., Mercedes C-class) for August 2024, sourced from rentalcars.com.

Temperatures & Rainfall: August averages sourced from TUI, Holiday Weather, and Thomas Cook.