A strong Australian dollar combined with cheap euro mortgages could make conditions highly favourable for savvy Australian investors in European destinations right now. The dollar has continued to gain against both the euro and pound since summer 2015, knocking AU$00,000s off the price of property in hot spots such as London, Paris or Europe’s rising star, Lisbon.

The European Central Bank’s low Euribor rate means local lenders are offering historically low interest rates, including to non-resident foreigners. In Portugal, for example, rates of around 2.5 per cent plus Euribor, fixed for terms of five years or more and requiring just a 20 per cent deposit are available from leading banks such as Caixa Geral. In France, in some cases fixed rate mortgages are available from as little as 1.70 per cent with a 20 per cent deposit and 20-year term.

“London’s buy-to-let market remains one of the most buoyant in UK and Europe, with upward pressure on rental demand,” said Julian Walker, director at InternationalPropertyForSale.com. “Predictions are for stagnation in property values during 2017, due mainly to the Brexit effect, but both JLL and Savills forecast a growth of 15.2 per cent and 20.8 per cent respectively over five years to 2021.”

London’s market has investment opportunities for a wide range of budgets – average apartment prices across the city are circa £450,000, ranging from an average of £1.4million in Kensington and Chelsea to £210,000 in Barking and Dagenham. Agents expect the sub-£1 million to remain active and resilient in 2017, supported by government programmes, such as Right to Buy. Furthermore, the current stamp duty regime continues to make properties at this end of the market relatively attractive to investors. This implies that outer prime locations are likely to do better than a more traditional – and more expensive – Prime Central London spots.

“There are hopes that the UK’s Government’s November Budget could introduce some incentives for property investors,” added Mr Walker. “Perhaps a reversal of the increased stamp duty rate for second homebuyers.”

In Europe, Lisbon has become a popular investment spot, thanks in part to its Golden Visa programme, which grants residency to non-EU foreign citizens who invest in property of a certain value. Portugal began recording positive house price growth 18 months ago, spearheaded by its capital, according to the RICS/Ci Portuguese Housing Market Survey, which predicts average price rises of just under three per cent over the next 12 months. Sought after districts of Lisbon, where opportunities are typically restored palaces or brand new developments, include Barrio Alto, Chiado and Baixa. As a guide, investment property for sale in Portugal includes one-bedroom apartments in Lisbon’s Barrio Alto from €340,000 and three-bedroom luxury apartments in Príncipe Real, five minutes from Chiado, for €1million-plus.

Meanwhile in Paris, sales increased throughout last year. Agents there group the properties most sought-after by foreign investors into three categories, namely two or three-bedroom apartments, four or five bedroom homes or family homes within 25 kilometres of the city centre. Popular areas include just north of the 16th arrondissement, next to avenues Foch and Victor Hugo, the 8th arrondissement and 8th and the 17th arrondissements by Monceau Park, and the 7th or 16th arrondissements that offer views of the Eiffel Tower. Paris prices are expected to continue to rise steadily in 2017.

See also:

What does Brexit mean for Australia's property market?

What will happen to London property prices in 2016?

Investing when rents are up and yields are down