According to a new study by 1st Move International, which took a close 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 investments.
Property investment has never been hotter 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 a new study by UK relocation company 1st Move International, which took a close 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.
BEST PLACES TO INVEST IN PROPERTY IN EUROPE
In Lithuania, the capital Vilnius promises an average rental yield of 5.65%, according to the latest data from Global Property Guide. 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 from buying 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 a gross annual rental yield of about 4.5% (tax on rental income is 20%).
With property prices rising by 6.7% in the year to June 2024, the value of investment is expected to increase further. Romania ranks third in this report, with advantages including a relatively low additional cost of purchase, coupled with a very low average rental income tax rate of 10% and a relatively high gross rental yield of 6.46% per annum. Ireland is also promising for property investment, the country offers high yields, mainly due to high rental prices, but increased taxes can take a small bite out of annual net income. 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 the 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.
WHAT ARE THE LEAST FAVORITE COUNTRIES?
According to the report, Belgium, France and Greece appear to promise the lowest returns on investment. Belgium has one of the highest transaction costs in Europe and the tax on rental income can easily reach 50%. The average yield is around 4.2%, but this could be higher in Brussels. Property prices rose by 3.4% year-on-year in the second quarter of 2024. France is considered the second worst choice for property investment, according to the report, which highlights that taxes and the costs of buying and renting are relatively high.
For example, the average tax rate on rental income for real estate investors is 18.28%. The gross annual rental yield is around 4.5%. According to Eurostat, French property prices actually fell by 4.6% this year. Greece came in third on the list of worst countries for property investment, due to high purchase costs and rising income tax rates with average tax rates on rental income above 33%, the report notes.
WHERE DO PEOPLE WANT TO SHOP?
Spain and Portugal were the top destinations to buy, according to the study which looked at which countries were the most popular based on Google searches. 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 (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. Please note: This information does not constitute financial advice, always do your own research to ensure it is appropriate for your specific circumstances. Also remember, we are a journalistic website and aim to provide the best guides, advice and tips from experts. If you rely on the information on this site, you do so entirely at your own risk.
