Lithuania and Hungary are among the best countries to invest in property, while Belgium and France are ranked among the worst ones, according to a new study by UK relocation company 1st Move International.
The report examined key elements of property investments across European countries, including property tax rates, income tax on rent and gross rental yield, and their findings suggest that Lithuania is the top choice as the best country for real estate investment.
The best places to invest in property in Europe
Lithuania, the capital of Vilnius promises an average rental yield of 5.65%, according to Global Property Guide's latest data.
Rent prices are high in the country, more than 170% of what they were in 2015, according to the OECD. The income tax on rent is a moderate 15%. Foreigners are not restricted from purchasing property.
Property prices jumped by more than 10% in the second quarter of 2024 compared to the previous year, according to Eurostat and the trend is likely to continue, providing a good return on investment.
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Estonia is ranked the second-best choice for investors. Non-residents of the Baltic state are also allowed to buy property in the city. The buying cost, including taxes, is considered low, about 1.3%. Meanwhile, rental prices are relatively high, with an annual gross rental yield of about 4.5% and the income tax on rent sitting at 20%.
With property prices having risen by 6.7% during the year up to June 2024, the value of the investment could increase further.
Romania ranks third in this report, where advantages include a relatively cheap additional costs of buying, a very low average rental income tax rate of 10% and a relatively high gross rental yield of 6.46% per year.
Ireland promises high yields, mainly due to high rental prices, but elevated taxes could take a bite out of the annual net income. The country is facing a housing crisis with not enough homes being built for the increasing population, as prices continue to soar.
Related- Ireland needs 'tens of thousands' more homes annually to keep up with demand
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 9.8% and in Slovenia 6.7% in the 12 months previous to June 2024, according to Eurostat.
The worst places to invest in real-estate
Meanwhile, the worst countries to consider property investment according to this report are Belgium, closely followed by France and Greece.
Belgium has one of the highest transaction costs in Europe, and the income tax on rent can easily reach 50%. The average yield is about 4.2% but this can be higher in Brussels. Property prices increased by 3.4% year-on-year in the second three months of 2024.
France is consideredthe second-worst country to invest in property, according to the report, which highlights that the taxes and costs of buying and renting are relatively high. For instance, real estate investors' average rental income tax rate is 18.28%. The annual gross rental yield is around 4.5%. According to Eurostat, French property prices actually declined by 4.6% this year.
Greece came in third place in the list of the worst countries for property investment, due to the high costs of buying and raised levels of income tax with the average rental income tax rates being over 33%, notes the report.
What Google can tell about the trends
The report looked into which countries are the most popular based on Google searches and found that Spain and Portugal were the top destinations to buy.
Global searches for buying property 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 (like renting out a property) in Spain.
The second most-searched country was found to be Portugal with more than 270,000 searches on search terms relating to buying property in the country, where foreigners can buy property under the same conditions as locals.
However, the popularity of these two countries has resulted in a chronic shortage of affordable housing for the locals. Nominal housing prices have risen by almost 70% in Portugal since 2015, according to OECD.
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