What are the best European countries to invest in property in 2025?
Property investment has never been so hot in Central and Eastern European countries, with Lithuania and Hungary offering the best return on investment for those looking to cash in on the property market in 2025.
According to new research from UK relocation company 1st Move International, which took a closer look at key elements of property investment, including property tax rates, rental income tax and gross rental yield , Lithuania is the best choice for real estate investment.
In Lithuania, the capital of Vilnius promises an average rental yield of 5.65%, according to the latest Global Property Guide data. Rental prices are high in the country, more than 170% of what they were in 2015, according to the OECD. Tax on rental income is 15% on average. Foreigners are not restricted in purchasing property.
Meanwhile, property prices rose by more than 10% in the second quarter of 2024 compared to a year earlier, according to Eurostat, and the trend is likely to continue, providing a good return on investment. Estonia ranks as the second best choice for investors. Non-residents of the Baltic state are also allowed to buy property in the country. Taxes are relatively low, but rental prices are high, resulting in an annual gross rental yield of around 4.5% (rental income tax is 20%).
With property prices increasing by 6.7% in the year to June 2024, the value of the investment is expected to increase further. Romania ranks third in this report, where advantages include a relatively low additional cost of acquisition, coupled with a very low average rental income tax rate of 10% and a relatively high gross rental yield of 6.46% per year.
Ireland is also promising for property investment, the country offers high yields, mainly due to high rental prices, but high taxes can take some of the net annual income away. The country is facing a housing crisis with a shortage of homes being built for the growing population, while prices continue to rise.
According to this report, there are also good opportunities to invest in property in Central and Eastern European countries such as Hungary, Slovenia and Poland, where rents are high (in Hungary 180% of their 2015 level) but taxes are moderate. House prices in Poland rose by 17.7%, in Hungary by 9.8% and in Slovenia by 6.7% in the 12 months to June 2024, according to Eurostat.
According to this report, Belgium, France and Greece appear to promise the least return on investment. Belgium has one of the highest transaction costs in Europe and tax on rental income can easily reach 50%. The average yield is around 4.2%, but this can be higher in Brussels. Property prices rose 3.4% year-on-year in the second three months of 2024.
France is considered the second worst choice to invest in property, according to the report, which points out that taxes and the costs of buying and renting are relatively high. For example, the average tax rate on real estate investors' rental income is 18.28%. The annual gross rental yield is about 4.5%. According to Eurostat, French property prices actually fell by 4.6% this year.
Greece came third on the list of worst places to invest in property, due to high purchase costs and rising income tax levels with average rental income tax rates above 33% , the report points out. Spain and Portugal were the top destinations to shop, according to the study which looked at which countries were most popular based on Google searches. Global property purchase inquiries reached 279,000 between 2023-2024 for Spain.
The country offers non-resident tax benefits to foreign investors, a standard rate of 19% for EU/EEA citizens or 24% for third-country citizens on taxable income (such as renting out a property) in Spain.
The second most searched country was found to be Portugal with more than 270,000 searches in search terms related to buying property in the country, where foreigners can buy property on the same terms as locals. However, the popularity of these two countries has resulted in a chronic shortage of affordable housing for locals. Nominal house prices have risen by almost 70% in Portugal since 2015, according to the OECD.
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