Of central importance

A growing number of British buyers are going to town on the European property market

There used to be two main types of foreign ownership. The first was the traditional rural holiday home, occupied a few weeks each year but sitting empty much of the time. The second was an urban buy-to-let which the owner could rarely, if ever, use because it was occupied by long-term tenants.

There used to be two main types of foreign ownership. The first was the traditional rural holiday home, occupied a few weeks each year but sitting empty much of the time. The second was an urban buy-to-let which the owner could rarely, if ever, use because it was occupied by long-term tenants.

But the rise of the short-term corporate tenant, the increased popularity of student lets and the proliferation of budget airline routes mean landlords can mix business with pleasure by enjoying occasional visits to their properties in European capitals, warmed by the fact that most of the time they are still earning them money.

Take Ron and Margaret Rhode, both teachers in Liverpool. Their son Andrew spent a year studying European law in Paris in 1999 but instead of helping him find a room to rent, they bought a tiny third-floor studio flat in a house in Le Marais for £52,000.

"Our intention was to keep it for just the year but we found ourselves using it for visits at Christmas and in August so we kept it on with a rental agent," says Margaret.

The couple restrict its use to short lets. In the four years since Andrew left Paris the studio has been rented by students (who agree to vacate it when terms end to allow the Rhodes to stay there) and by corporate tenants (who can stay only a maximum of three months). "We ensure there's a two- or three-week gap between tenants so we can pop over - it seems mad to have an asset like this and not use it," Margaret says. As a bonus, the value of their studio has now risen to about £80,000.

According to Gioia Zwack of Dolphin International Properties, a consultancy based in Italy and New York, it is now increasingly common for Britons to buy urban properties in other countries, use them from time to time but also rent them out. "Places like Rome are perfect for this. There are huge numbers of ex-pats living there for part of the time and the market is very strong, although entry prices can be high. It's elegant and beautiful but easy to access from the UK. Now we're seeing other less obvious capitals emerge as business centres and that means there are many short-term tenants working for companies locating there. Budapest is an example. My family bought a property there 10 years ago and it's quadrupled in value since. The cheapest flats have now gone but it's still a hot spot," Zwack says.

Most Budapest homes are over 75 years old, and due to low rents and state control until the late Nineties maintenance was neglected. There are over 800,000 apartments in the city but 25 per cent need renovation. In some areas property prices are still as low as €75,000 (£51,000) for an apartment but in prime locations these soar to over €1m (£685,000).

Local investment advisers like A1 Real Estate, which has an English language website to appeal to foreign buyers, say purchasers should avoid areas that have already seen big improvements, such as the 5th district where prices have doubled in the past three years. Instead it recommends the up-and-coming bohemian quarters in the 6th district, the 8th and 9th which are close to the university, and the 13th which has been earmarked by the city council for new developments.

Hungary has long-term investment appeal. In May this year the country joined the European Union and it will adopt the Euro in 2007 or 2008. A report by consultants PricewaterhouseCoopers says Hungary, with other new EU entrants the Czech Republic and Poland, should enjoy growth of up to 4.5 per cent this year and next as their economies and untapped markets attract western companies.

As a result, property developers are piling in too. Simon Hill of investment agency Letterstone, which bulk-buys apartments before selling them to UK buyers, has just sold dozens of new flats priced from £60,000 to £90,000 in a development near the centre of the Czech capital.

"Comparable prices in Paris or large German cities are three or four times those of Prague. There will be an 'evening up' of prices so Prague's values will rise significantly," says Hill who is now considering the Slovakian capital, Bratislava, as a possible new location.

An estimated 34,000 British students spend a year or more at a mainland European university according to the Department for Education and Skills, giving a potential tenant market for would-be landlords in addition to short-term corporate renters.

Now Budapest and Prague have joined west European cities like Paris and Rome as destinations for cheap and frequent budget airline routes from the UK. EasyJet flights to the Hungarian capital from Bristol cost as little as £28.48 return; a return from Newcastle to Prague is dearer but still only £63.48. This makes these destinations appealing for buyers wanting good long-term returns as well as chic places to stay.

Richard Donnell, head of research at British property consultancy FPDSavills, says would-be buyers seeking maximum returns should target large European capitals like Warsaw, Prague and Budapest where international firms are establishing bases. "One of these cities will become like Notting Hill. It'll suddenly become very fashionable and produce good capital rises" he predicts.

www.dolphinprop.com; www.letterstone.com; www.a1realestate.hu; www.fpdsavills.co.uk