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What are the Best European Real Estate Investment Locations for 2025?

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What are the Best European Real Estate Investment Locations for 2025?
Real Estate Investing
  • Pro. By Pro.
  • January 12, 2025
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#European real estate investment

Explore top European real estate investment spots, with Lithuania and Hungary leading in rental yields and tax advantages for 2025.

In the intricate tapestry of global real estate investment, the question of which European countries stand out as prime candidates for lucrative opportunities is both pressing and multifaceted. A recent report meticulously examines a variety of factors, from average rental yields to property taxation, in order to identify the most advantageous locales for property investment across the continent.

The fervor surrounding real estate investment has reached unprecedented heights, particularly within the Central and Eastern European regions. Notably, Lithuania and Hungary have emerged as frontrunners, offering exceptional returns for investors keen on capitalizing on the burgeoning property market projected for 2025. A thorough study conducted by the British relocation firm 1st Move International delves into the essential elements of property investment, encompassing tax rates, income tax on rental income, and gross rental returns. The findings unequivocally position Lithuania as the premier choice for prospective investors.

Optimal Locations for Real Estate Investment in Europe

In Lithuania, the capital city of Vilnius boasts an impressive average rental return of 5.65%, according to the latest data from Global Property Guide. The rental landscape in Lithuania has undergone a remarkable transformation, with prices soaring over 170% since 2015, as reported by the OECD. The income tax imposed on rental income remains relatively modest at 15%, and foreign investors face no restrictions when acquiring real estate. Furthermore, property prices surged by more than 10% in the second quarter of 2024 compared to the previous year, as indicated by Eurostat, suggesting a sustained upward trend that promises favorable returns on investment.

Estonia ranks as the second-best destination for investors. Non-residents are permitted to purchase real estate, and while taxes are relatively low, rental prices remain elevated, yielding an annual gross rental return of approximately 4.5% (with an income tax on rents set at 20%). The property market in Estonia has also experienced a notable uptick, with prices increasing by 6.7% in the year leading up to June 2024, indicating further appreciation in investment value.

Romania secures the third position in this analysis, characterized by relatively low additional purchase costs, a remarkably low average rental income tax of 10%, and a commendable gross rental return of 6.46% annually. Ireland, too, presents a promising landscape for property investment, driven by high rental prices. However, the specter of rising taxes looms, potentially diminishing annual net income. The country grapples with a housing crisis, exacerbated by insufficient construction to accommodate a burgeoning population, further inflating property prices.

The report also highlights the investment potential in other Central and Eastern European nations, such as Hungary, Slovenia, and Poland, where rental prices have surged (with Hungary witnessing a staggering 180% increase compared to 2015). Property prices in Poland have escalated by 17.7%, Hungary by 9.8%, and Slovenia by 6.7% in the twelve months preceding June 2024, as reported by Eurostat.

Popular Destinations for Real Estate Searches

Spain and Portugal emerge as the most sought-after destinations for real estate purchases, as evidenced by a study analyzing Google search trends. Between 2023 and 2024, global searches for real estate in Spain reached a staggering 279,000. The country extends tax benefits to non-residents, with a standard tax rate of 19% for EU/EEA citizens and 24% for non-EU citizens generating taxable income, such as rental income.

Portugal follows closely, with over 270,000 searches related to its real estate market. Foreigners can acquire property under the same conditions as local citizens. However, the burgeoning popularity of these two nations has precipitated a chronic shortage of affordable housing for local residents. Since 2015, nominal house prices in Portugal have surged by nearly 70%, as reported by the OECD.

While the aforementioned insights provide a comprehensive overview of the European real estate investment landscape, it is imperative to approach this information with due diligence. Prospective investors are strongly advised to conduct thorough research to ensure alignment with their individual investment objectives and risk tolerance.

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