Lithuania and Hungary are among the best places to invest in property, while Belgium and France rank among the worst, according to new research from UK relocation company 1st Move International.
The report examined key elements of property investment across European countries, including property tax rates, rental income tax and gross rental yield, and their findings suggest that Lithuania is the top choice as the best country for real estate investments.
Lithuania’s capital 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.
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 city. The purchase cost, including taxes, is considered low, around 1.3%. Meanwhile, rental prices are relatively high, with a gross annual yield of around 4.5% and rental income tax at 20%.
With property prices increasing by 6.7% in the year to June 2024, the value of the investment could increase further. Romania is ranked third in this report, where the advantages include a relatively cheap additional purchase cost, a very low average rental income tax rate of 10% and a relatively high gross rental yield of 6.46% per annum .
Ireland promises high yields, mainly due to high rental prices, but elevated taxes may 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.
Meanwhile, the worst places to consider investing in property according to this report are Belgium, closely followed by France and Greece.
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 country 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.
The report looked at which countries are most popular based on Google searches and found that Spain and Portugal were the top destinations to shop. 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.